Tesla is burning through cash so fast that the California automaker risks going bankrupt before the end of 2018, according to an analysis Bloomberg conducted Monday of CEO Elon Musk’s spending habits.
The Silicon Valley company is burning through more than $6,500 a minute, the analysis notes. Tesla ended 2017 with $3.4 billion on hand and more than $9.4 billion in outstanding debt, leading analysts to speculate the company will need to raise money fast. Tesla reports earnings May 2.
Musk, a billionaire tech entrepreneur who owns more than 20 percent of Tesla, spent $146 million on interest payments for the company’s massive debt in the past quarter. The company spent roughly the same interest expense as GM, a company that dwarfs Tesla in revenue gains.
The company’s recent hiring binge is only making matters worse. Tesla employed fewer than 1,000 employees in 2010. That number has exploded during the last eight years – it now has nearly 40,000 workers working around the clock trying to get the Model 3 online. Musk also doubled the company’s workforce in 2017 after Tesla merged with SolarCity.
Musk’s ability to convince customers that Tesla is the wave of the future has allowed him to string together a staggering $854 million in customer deposits as of the end of 2017. Customer deposits are essentially cash payments that serve as loans. The situation is dire for customers if Tesla folds. If the company goes bankrupt, those deposit holders would likely be wiped out.
Many of Musk’s cult-like followers don’t mind the risk.
“The morning after the Roadster was announced, I put a deposit down. Putting down $50,000 for a Roadster that won’t be out for a few years is kind of like buying a bond that returns zero,” Bruce Sidlinger, a die-hard Tesla customer living in Arizona, told Bloomberg. “Elon Musk is one of our planet’s great hopes. I would offer a kidney to him if he needed it.”
Concern is growing about the company’s finances. It managed to build a mere 260 Model 3s between July and September of 2017. That number is well below the 1,500 Tesla promised before the end of the fourth quarter of said year. Total orders for the wallet-friendly vehicle tumbled from a high of 518,000 to 455,000.
Production on the highly-touted vehicle was expected to expand from 100 cars in August to 1,500 in September then plateau to 20,000 per month in December 2017. CEO Elon Musk promised to eventually produce 20,000 cars per month. The falling numbers coincide with Tesla’s inability to turn a profit.
Analysts are beginning to turn on the company. Tesla is not in financial condition to absorb any more bad news, one analyst told The Daily Caller News Foundation
“If you look at the financials, they are going to run out of money in less than three months,” Vilas Capital Management CEO John Thompson told TheDCNF about what he sees as the company’s inability to deliver the family friendly Model 3. Tesla is making only around 975 Model 3s a week — well short of the 2,500-unit rate target by the end of this quarter.
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