Tesla burns Rs. 3cr/hour; could run out-of-cash by Aug'18
Electric carmaker Tesla has been burning through "a lot" of money over the past one year - a startling amount of $8,000/minute or $480,000 (over Rs. 3.1cr) an hour, according to Bloomberg. If the current burn rate continues, Tesla would be out of cash on 6 August 2018, at 2:17 am (New York time). Find why Tesla's cash reserves could run dry next year!
Investors not concerned about how quickly Tesla's burning cash
Analysts expect Tesla's cash burn to continue as the company finances and increases the output of its "important" $35,000 Model 3, which, the car maker says, will bring in money. However, its investors are reportedly not worried about the high cash burn rate. Even Tesla's share price has increased by 3% to $317.81, taking the company's market capitalization to $53 billion.
Tesla needs funding to stay alive
Tesla recently announced that it is going to ramp up the production of the Model 3 sedan, which is going through "production hell" because of battery assembly issues. And, to boost the troubled Model 3 production, the electric carmaker needs a lot of money. Analysts have also warned Tesla now needs extra money to be able to fund its other projects.
Musk to raise funds through next-gen Roadster orders
Last week, Tesla CEO Elon Musk said that they are designing a semi-electric sports car, the next-generation Roadster, an upgraded version of Tesla's luxury-electric sports car, which can do 0-60mph in 1.9 seconds. In a move, which highlighted Tesla's need for money and can also help fund its production challenges, Musk unveiled his plan to raise funds through upfront payments for upcoming vehicles.
Musk wants full upfront payments for Roadster
Tesla would demand full upfront payments for the $250,000 Roadster (for Founder Series: first 1,000 cars) that would be delivered around 2020. Though the car may not be available for years, this move could generate $250mn for Tesla. For reserving the regular Roadster, customers need to pay $50,000. Electric Semi truck, which would go into production in two years, can be pre-ordered for $5,000.
Burning $1bn a quarter: Massive investment in building Model 3
Funds raised through upfront payments would be less compared to Tesla's needs, says Bloomberg. Tesla is burning over $1bn a quarter due to Model 3 production; it's unlikely to generate a return anytime soon. Estimating that Tesla needs extra $2bn by mid-2018, Bloomberg Intelligence's Senior Analyst Kevin Tynan said, "Whether they can last another 10 months or a year, he needs money, and quickly."
Have ample money to meet production targets: Tesla
According to Tesla, it has "ample money" for meeting the production goal of 5,000 Model 3 sedans by Mar'18. In a recent letter to shareholders, the automaker said that after March, it would "generate significant cash flows from operating activities." Tesla CFO Deepak Ahuja also said that the company's expenditures would decline as it "pays off" its Model 3-related expenses.
Patience and enthusiasm of customers, investors
Christian Hoffmann, Associate Portfolio Manager & MD at Thornburg Investment Management, said, "So long as the company (Tesla) is burning cash, it will remain dependent on the patience and enthusiasm of public markets or the deep pockets of a white knight."
