That said, $30M a month is not that many cars. If they can sell them, and losses don't increase as a function of sales, which seems to be the case now, they will eventually be in good shape.
EDIT: TL;DR: This quarter they lost the same amount as last quarter but sold 25 million more in cars. That means for every additional dollar in car they sold over last quarter, they lost that dollar. Not exactly scalable but hopefully temporary.
Their statement is available at: http://ir.teslamotors.com/secfiling.cfm?filingID=1193125-12-...
"The third quarter was a fundamental turning point for Tesla as we successfully transitioned to a mass production car company, growing from manufacturing 5 cars per week at the beginning of the quarter to 100 cars per week by the end. That rate has doubled since last month and is now at over 200 cars per week or 10,000 cars per year, which is at the critical threshold needed for Tesla to generate positive operating cash flow. One month from now, we expect Tesla to double production again and achieve the target rate of 400 cars per week or 20,000 per year. Despite many short term costs associated with the ramp, Tesla nonetheless expects to get approximately halfway to the 25% gross margin target by end of year."
edit: until they are not producing at least 200 cars / week, the operating cost of their manufacturing line is actually larger than the money they make from those cars produced. So, based on that logic Tesla should be losing money but less than in the past. However, in this quarter they went from manufacturing 5 cars/week to 100, which is something you can probably only do by revamping your operations (e.g. acquire new machinery, hire new people, etc.) Therefore, you have to incur a cost now in order to get the benefits in the future.
In addition, they've been ramping up production (they're roughly halfway to their target 400/wk goal), and that involves overhead like training new staff and building out an operations team. They should get to full production capacity at the end of the month, but they've already hired those extra workers and they're going to burn through cash while they get up to speed.
That is not how GAAP accounting works. You record revenue when you finish building the car and it leaves the factory gate, not when you accept a deposit.
Its interesting how in some political ads I've been seeing, a politician is 'called out' for supporting funding for companies like Tesla specifically.
Anyway it's an odd argument when we look at the history of the country where governments and specific companies often worked hand in hand and continue to do so in so many areas.
Many argue that the American government ought to be more aggressive about being pro-business, as our friends abroad are. E.g. if the Taiwanese, Israelis, Chinese, etc have very strong government-private partnerships (e.g. subsidies for engineering jobs, or green-lighting through regulatory processes, or access to cheap capital) then the US competitors have trouble competing. What I find so odd is the same camp that often says the US needs to be more pro-business, is often, as you describe, against government support of American business!
Historically, industrial policy doesn't have a terrific track record.
And I wouldn't even agree with that. We've seen what happens when government decides to support Hollywood.
Ultimately Tesla, if it really does continue to grow, will need to build factories in the traditional manufacturing states if it wants to gain the political traction the automotive sector enjoys.
I did the same thing about a year ago and I'm still happy that I did, despite the stock not moving over the past year. I do believe Tesla can become a major car manufacturer during the transition to electric cars, since this period will likely be fatal to some of the weaker legacy companies.
I also realized that I may have purchased a ticket to Mars. If Musk's plans for both Tesla and SpaceX pan out, my Telsa shares will hopefully be worth as much as a trip to Mars in 30-35 years :)
Has anyone investigated that as an investing strategy?
At the very least, it seems that governments proactively favoring companies whose profitability lies in investing for high productivity work instead of labor intensity or natural resources tends to pretty compatible with decent outcomes.
I used to invest back in the day. Anyway, there are many investing strategies. They all have names such as Value, Growth, Event Driven, etc. I won't list them all. The investing strategy that attempts to exploit movements in stock price after an event (e.g. the type that you are asking about for the earnings announcement in the Tesla example) is called "Event Driven" investing. Another example of an "event" would be after an acquisition is announced to the public. Typically the target (one being acquired) stock will go up and the acquiror (one acquiring) will go down. Investors often try to take advantage of this trend. What is the relationship that investors are betting on if the target price always (usually) goes up, and the acquirer going down? Closing risk. At any point the acquisition, despite being publicly announced, could fall apart because of due diligence issues, etc.
Relating all that back to your question about Tesla: the fundamental value or true value of a company may or may not be reflected in a company's stock price. Think of the stock market as a manifestation of what people (investors) might believe the value is, but the reality is that the fundamentals might be vastly different. The reversion back to norm is something that happens as the market (investors who are imperfect--trust me--think AIG, Bear Stearns, Lehman) attempts to settle on true value.
Side note: Volatility in the stock price could also be attributed to a small float (not that many shares outstanding which leads to a small number of investors causing spikes in the price), but I'd have to look at Tesla's stock info to be certain.
Hope this helps,
Jenny
Singapore proved that heavy government subsidization of research can pay enormous dividends in economic growth. Other countries are having tremendous success doing the same.
Then let's start by getting rid of chapter 11, which allows businesses to go bankrupt, then go back into existence again. Most countries do not have anything like it, and its existence has been horrible for some sectors, for instance the airline industry.
1. http://www.nytimes.com/2012/10/26/business/global/family-of-...
See Also: http://en.wikipedia.org/wiki/Yukos
http://www.politifact.com/florida/statements/2011/nov/15/ame...
Every federal government contract that has even a hint of favoritism is litigated to all hell, where lawyers comb through everyone's emails going back years to dig up any dirt they can find. If it was a big problem, we'd know about it.
Nepotism is alive and well at the state and local level. This is partly because state and local governments are far less sophisticated than the federal government in terms of process and people, and also because there is not a strong culture of litigating contracts.
Remember the fun with Countrywide and the sweet heart loans? How some politicians or their friends do so well in the stock market or get into IPOs at a level not afforded to the public. If not family is it not worse when those who support your campaigns are the ones more likely rewarded with the contracts?
So yes, while direct attempts may be protected against nothing stops the train of indirect benefits.
Big organizations have transaction costs associated with them. That's kind of inevitable. But the question is whether eliminating a few billion here and there in transaction costs is worth forgoing potentially huge benefits from public/private partnerships.
I'd say overall it is beyond what an early stage startup can do (non-dod-focused), without a great partner. Selling products is a lot easier than selling ongoing services, but the profit is all in services. A lot of the difficulty was due to it being a classified contract (the work itself wasn't, but the work locations and interoperability were). It's probably feasible for a successful small business with a full time person, particularly if the business is set up to go after government from the beginning.
Big companies aren't cost-free as clients, but there's less "if you do X wrong, you could go to jail" (which essentially never happens absent willful fraud, but still). The citizenship requirements also make it really hard for tech companies.