What Tesla Motors really needs is a charge of money to keep running. The question is how much and when? Of course Elon Musk the CEO of Tesla has been mum on the method of funding the pretend auto company. They have drawn down all of the US DOE loan money that old Chu Chu gave them. They have pretty much tapped their future customers for deposits (reservation payments) on cars to be delivered in the next year, and they are paying their vendors extra slowly as Tesla tries to preserve cash. Their problem is each time they deliver a car it costs them cash. The cash inflow is reduced by the already received reservation payment. John Petersen who writes for thestreet.com has opined that Tesla has major cash problems.
Petersen believes that Tesla’s working capital and shareholder’s equity have already been eradicated as of the end of August. I can’t wait till they report third quarter results to see if Petersen is correct. The Green Machine thinks Petersen is probably correct.
Elon was interviewed on Bloomberg a couple days ago. He refused to discuss how many cars they will deliver this quarter or the next quarter. His body language was rather awkward in the interview and it looked like a replay of Obama being questioned earlier in the day on the Univision Spanish Language Channel. It is quite amazing how similar the body languages of Musk and Obama were when they had to deal with direct questions as to their versions of reality. Take a look at both videos in the following links: The Elon link is pretty long winded.
Both Obama and Musk talk eloquently of the future without stammering, but discussing anything that is in the near term is simply off limits as it simply stinks. Elon uses the excuse that he is in the nondisclosure period under the SEC rules for traded stocks. The President uses the excuse of some poorly made movie or the residual effects of what GW handed him. Elon stated that next year will be on target to see 20,000 Tesla vehicles sold with a gross margin of 25%. I doubt Tesla will do this.
Elon also smirkingly stated that Coda his “competition” from the right will be out of business in rather short order. I have blogged how GW’s secretary of the treasury Hank Paulson is involved with Coda and their Chinese electric car. Hank at least did not get any DOE money while Elon dug deep into our pockets. I think Coda is Coda Blue and will flat line but they may hold on longer than Tesla. When Coda is taken off life support at least we the taxpayers (The 53% per MITsquared) will not have lost half a billion dollars. It should be noted that Coda has sold less than 100 of their plug in vehicles since its introduction almost six months ago.
So how does Tesla survive in the world of harsh realities? First they have to raise a significant amount of equity that I estimate to be in the range of half a billion dollars. This will dilute the existing shareholders significantly. Second they simply have to give up on the lie that they will ever sell a car for less than $70,000 and remain in business. Third they should tell the DOE that the $30,000 electric Volkswagen (peoples’ car) was a pipedream and that they are a high performance specialty auto company that can only survive selling very high price cars to the wealthy. In fact Tesla should start charging $150,000 per vehicle and I think they will sell the very same limited quantity of cars a year if they charge $50,000 extra. I bet Elon is thinking of how he can change course and be an electric Masarati.
Elon may actually be wishing MITsquared prevails in November and that Bain Capital comes in to run the business and turn it into a success. If he continues the charade that Tesla will provide 20,000 affordable cars next year and pay back the DOE he will not even go as far as John Delorean who sold a total of approximately 9,000 of the DMC-12s. If Oh Bummer wins Elon could get another half billion from the DOE and rename the Model S as the DNC-1%. Note the DNC is the Democratic National Committee.
Perhaps the best solution is that Elon quickly produce a cheap movie that mocks the accomplishments and the personal life of Al Gore, allowing a mob of ultra-green zealots to spontaneously burn down the Fremont California assembly plant. Tesla can claim the insurance value of the assembly plant and its inventory and can return the DOE money to Chu Chu who will happily accept it. The Fremont assembly plant is about a mile north of the Solyndra plant that is shuttered. Perhaps the film should be called “The Impotence of Electrons”.
As Al Gore is hard of hearing he will think the movie is called “The Importance of Morons”. Oh Bummer will simply blame the movie for the next calamity that hits the US. MITsquared will say the fire in Fremont was avoidable if only Bain Capital had taken over Tesla earlier.