Tesla and why it’s hard to keep the lid on

Semi
Semi by Tesla, © Tesla

Tesla’s first-quarter report showed another record loss, USD 700 million, which lowered its cash by a whopping USD 600 million. Considering this, it seems unimportant that revenue jumped to USD 3.41 billion or that Model 3 production is being ramped up to full capacity. Tesla has been burning through massive amounts of money. It could be forced, despite its chief executive’s vehement denials, to raise capital at least once before the end of the year. Some debt securities, that is, bonds, are going to mature in the next 12 to 18 months, and the total of accounts payable hit the USD 2.6 billion mark. At the end of the quarter, Tesla (Nasdaq: TSLA) had a cash balance of about USD 2.7 billion, which includes close to USD 985 million in customer deposits for all models.

The company will require a lot more financial support to meet its July goal of 5,000 Model 3 cars a week, a fact that many analysts seem to gloss over. Nomura’s even welcomed a planned reduction in investment during the year. By contrast, there are those who think that Tesla will need another large infusion of capital, so that Model 3 sales can generate enough cash flow to meet all financial targets.

Meanwhile, it seems as if the company’s chief executive, Elon Musk, is growing weary of analysts’ opinions. He cut them off during Tesla’s first-quarter conference call, after skipping two questions he said were “so dry” that they were “killing him.” He then went straight to YouTube for a retail investor Q&A and refused to return. Wall Street wasn’t all that happy about the incident and sent the stock down 5 percent overnight. One question he didn’t answer was about the number of deposits for Model 3. There could be as many as 450,000 or as little as 250,000. Tesla has been under intense scrutiny after crashes involving its Autopilot feature, so some potential buyers may have asked for their money back to get a competitor’s vehicle, of which there are more and more to choose from.

Regarding the accidents, the National Transportation Safety Board and other agencies involved must have been furious with Musk for leaking investigative information to the media, as well as reportedly attempting to spin their preliminary findings in Tesla’s favor.

Nikola Motors claims patent infringement

On top of this, Nikola Motors, a manufacturer of fuel cell hybrid trucks, has filed a USD 2 billion lawsuit, claiming Tesla’s Semi infringed on several of its patents, including design features. Indeed, putting the companies’ trucks side by side reveals a striking similarity. Rumors have it that Tesla had also tried to poach its competitor’s staff.

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Risk warning

Share trading can result in a total loss of your investment. Consider spreading the risk as a sensible precaution. The fuel cell companies mentioned in this article are small and mid-cap ones, i.e., they may experience high stock volatility. This article is not to be taken as a recommendation of what shares to buy or sell – it comes without any explicit or implicit guarantee or warranty. All information is based on publicly available sources and the content of this article reflects the author’s opinion only. This article focuses on mid-term and long-term prospects and not short-term profit. The author may own shares in any of the companies mentioned in it.

Written by Sven Jösting

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