WHEN WILL TESLA LOSE A BILLION DOLLARS IN A QUARTER?
It is not very interesting to ask the question when will Tesla make money(never), or even if Tesla will lose money(all the time). Rather, at what level of losses will the sham of running a completely unviable company cause people to freak out.
My guess is the company (Tesla) could lose a billion dollars in one quarter. This could happen sometime this year or early next. Is that enough to freak out? It could be.
For the record, there is nothing scientific about what I am saying and even if they, Tesla, lost that sum of ominously worrying money in profit, it seems it might not matter to the investor and banking class. Things will be just fine right? Hell, if losing a billion dollars is ok , why not 2 billion? If 2 billion is not, make it 4? The infinite regress of this logic, common it seems in the enlightened Valley that feeds the adolescent misogynistic whims of people like Elon Musk and Travis Kalanick, means there is a real limit to losses, since there is none in regards to cultural depravity.
A one billion dollar loss therefore may be just too much to handle. What is important now is that all of the lapdog investor class believe that the Model 3 is the iPhone moment. And now it is here sort of. Which means they want to get paid rather than just be the checkbook that funds joy rides for the incoming middle class Tesla owner. Speaking of joyrides, for 1 billion usd in losses, investors, if they just want to give charity joyrides to the public, could build approximately two Ferrari Worlds. On the other hand, for even more bang for the buck, the charity investor class could spend $1 billion dollars on 1,000 dollar VR experiences for 1 million people. Granted , any serious gamer worth his salt will tell you that amount of money, $1 billion dollars, is only good for 500,000 people since a proper VR rig is closer to 2,000 dollars in cost.
Getting back to the iPhone, investors shouldn’t forget that Tim Cook’s labor extraction unit, key to Apple’s 20% profit margin, is Foxconn China. There, not only do they get money from the government to create jobs and profit for Apple, the company works slaves err people so hard they kill themselves. In other words, Apple is killing people to make money and that too is capitalism. I say that knowing I am a hypocrite but hating me is like hating the player. I didn’t make capitalism and I wasn’t born in China. In either case, Tesla has no luxury of slave labor, and only has the unions to scare in its bid to minimize its disadvantage of not having $8 dollar per hour Mexican labor in its Fremont plant. Once again, they are also more talented than I am, its just that $8 dollars per hour does go a bit better in Mexico than in the US. So in actuality ,they are overpaid for their standards, ands are probably more enthusiastic than Michigan workers who would have gotten $25 dollars per hour. Of-couse, none of this has passed the thoroughly incompetent Elon Musk. That sly devil has contract labor problems at the Nevada Giga Factory. Its Fremont Factory has underpaid contract workers as well ,with one worker from Slovenia spilling the beans after suffering injuries. Solarcity, now conveniently hiding somewhere in the labarynthian general ledger that is being directed by the once retired Deepak Ahuja, hired prison labor, thereby utilizing one of America’s darkest open secrets. That is slavery too, is legal in America, just as long as one is in prison! Of-course, Musk, the Earth’s savior said he knew nothing of the sort when confronted on record. Sure wink wink…errr Right. The point though is he can’t just send his outfit to Foxconn and he was too empty and short sighted to have realized Mexico is the new car capital of the global executive auto industry order.
Anyone who believes that this kind of calculated cold blooded off shoring of American labor isn’t a core competence of this 1% is also likely unaware that IBM has been making billions of dollars outsourcing even high tech US labor for over a decade. The more compelling historical context for labor is that it showed that Karl Marx, with a nod to Riccardo, saw through the haze of capitalism as the labor extraction industrial premise it was from the beginning. Once again, labor extraction, profit is necessary or else the system collapses. Collapses usually have bad consequences. Just consider my view cynical not apocalyptical and look to my previous post for more context. The positive view for instance is that the sole entrepreneur obviously can only work himself to death and knows that intuitively profit isn’t some abstract concept. It is work surplus, which he is directly and sometimes the only contributor to. We should praise the successful sole entrepreneur more than we do but since they don’t make billions they are forgotten.
Getting back to that billion dollar loss , if it were to happen , sometime within the next 6 months to a year might be as good as any.
Now is there any precedent for Tesla losing a lot of money after launching a new car. Well, there is actually and we just saw it within the last couple of years.
In the 4th quarter of 2015, Tesla’s slimy CEO was covering up for not being able to ramp the production of the vaunted Model X. He largely blamed labor cost. Tesla reported that they lost $320 million dollars in the period(Dec 2015) on revenues of $1.21 billions dollars. In percentage terms, it was a negative profit margin of 26 percent. To lose a billion under the same revenue and profit margin percentage ratio would require the company to generate $3.1 billion dollars in sales.
Tesla still loses that hundreds of millions dollars of cash in a quarter. In March of 2017 they had revenues of $2.7 billion dollars while losing $305 million dollars. What that therefore is telling us is on a simplistic level is that increasing revenues have improved its profit margin. If for Instance , Tesla, had kept there loss rate at -26%, they would have then had reported a loss of $702 million dollars in the 1st quarter of 2017. So the bankers were perhaps breathing a sigh of relief that the company hadn’t gone full titanic. The pig, err i mean money pit, err car company that is Tesla is losing less money on a percentage basis and making more revenues. If they therefore could only increase revenues even more, then profits should go up right?
Wrong. Tesla is launching a car that one of its cofounders, Ian Wright, thought was a mistake. I am not going to look it up, its out there, trust me(or maybe not). Meaning that if Ian Wright was right, then we are approaching D day. In other words, Ian Wright seems like a smart guy. Maybe not as smart as Musk, since he is always the smartest person in any room.
So what we have therefore is the potential for margin deterioration just after the launch and initial scale up of the Model 3. Tesla’s revenues are already near the $3.1 billion number. If Model 3 is a massive money loser, a negative 26% loss on the bottom line isn’t crazy since we have seen that kind of junket spill out of Fremont before. No one, and not even Henry Ford, who’s first auto company went bust in 1897, has been given this much rope to scale a chit model err I mean car company while printing loses.
If Model 3 turns into Model X, Musk and his fee grubbing bankers might not be able to stop the other members of the investor class clan from saying no mas and Musk tenure will fall by the wayside. Unfortunately, Tesla might be so knee deep that no one will be able to save it without nuking it.