I admire what Tesla has been able to achieve from a technological and a marketing point of view but I wouldn't call their business "fundamentally solid". Tesla stock has been one of the most heavily shorted equities for some time and it's because their balance sheet is a train wreck while their valuation is sky-high. Tesla burns cash at a phenomenal rate and regularly has to take on debt and / or raise new capital through equity offerings in order to stay in business. Of course they have to invest in the future- automobile manufacturing is a highly competitive, extremely capital intensive business and every OEM (Ford, GM, Toyota, Volkswagen,..) has to regularly invest huge sums of money in staying relevant. Tesla is no different in that regard.

> They make a net profit on their cars, but they are currently investing it all into aggressive expansion

Citation needed.

The numbers I'm looking at are the following: http://ir.tesla.com/secfiling.cfm?filingID=1564590-16-18886&...

As of March 2016:

$ 182,482,000 in Research and Development last Quarter.

$ 282,267,000 net loss in the quarter.

So even if we got rid of Tesla's ENTIRE R&D department, they lost $100 Million last QUARTER. The primary cost of Tesla is "Selling, general and administrative", which was around $300 Million.

The only other cost that's larger than their administrative costs were the $779,316,000 spent on parts.

#1 Cost: The parts (~$780 Million)

#2 Cost: Selling, General, and Administrative. $300 Million

#3 Cost: $182 Million spent on R&D.

These numbers are per quarter.

Tesla strikes me as too much of a cult of personality, at least from an investor's perspective. Amazon is another business that reinvests all its profits and then some, but Bezos could walk away without destroying the investment brand. I don't think that's true of Musk and Tesla.

Unlike Ford, GM, etc... Tesla has a much narrower market potential.

Yes Tesla's cars are "cool" and everybody wants one, but even the new "cheaper" model costs far more than the average person spends on a car. Right now, Tesla caters to the luxury market, and is viewed as a "cool alternative" to more traditional luxury makes.

Ford, Toyota et al, have models that cover just about every price range and every type of customer, from the extreme budget oriented to the extreme luxury sports car fanatic. Toyota owns Scion, Toyota, and Lexus for example - so if you need a car, chances are one of the Toyota offerings will satisfy your needs and budget. This opens the market potential to include just about every person.

The one thing that has worried me about Tesla for a long while, is Musk's claims that next year they'll sell 30% more cars, every year - something that's now proving to be an impossible feat. At some point, they were going to hit a ceiling of maximum potential sales as they attempted to wedge into the already entrenched high-end luxury sports car market - there just aren't enough buyers to keep that growth at these prices.

I agree, they have an extremely compelling and valuable product. They have aggressive aspirations and so far have a track record of achievement. This is pretty similar to other companies that rarely turn a profit e.g. Amazon.

That said they certainly have a huge hill to climb, but as he said its one we all need to climb so great that they are pushing ahead with a business model to make it there

Remind me- is Tesla a for-profit corporation or are they a non-profit organization? Making a profit is sort of the main point, though obviously not the only point. They've been around since 2003 so it's not like they're a scrappy Y-Combinator incubator company.

Well Tesla also relies on government subsidies as well a loan (which it paid back early, as did Ford). Also Ford is more than a 100 years old, so it's bound to have a bad period. We'll have to see what happens when tech companies are that old ( or will they even survive)

A difference is that Tesla hasn't really managed to execute its original plan, in particular:

- Use that money to develop a medium volume car at a lower price

- Use that money to create an affordable, high volume car

Amazon is way better at making money to invest in growth. Tesla ?still? is in a fairly deep well, and will need investments to crawl out of it. Big question is whether they will.

Good news is that they aren't at 2012 scale anymore; bad news is that they aren't improving recently (https://ycharts.com/companies/TSLA/profit_margin)

What? There are room for multiple companies that make a profit. The point is that claiming a business sucks that still makes a profit and provides value to lots of people is tone deaf.

Amazon was never a profit machine. I do think that's part of the core business, re-invest everything and more... and they turned into a giant comparable to Walmart.

As Amazon looses money on every sale, and makes it up with funding from new shareholders, I'm going to call it a Ponzi scheme and not a business.

>You know why Ford turns a profit? Because they've gotten those economies of scale.

Ford was immediately profitable, was it not? Even before implementing an assembly line?

Isn't Tesla also subsidized by the government?

The F series is their big profit center, but they do still make money on their other vehicles.

The F150 is not even sold in Europe so I don't think Ford only loses money there :P I would imagine that Focus and Fiesta are quite profitable.

That would imply something like a $10,000 profit on each F-150, if all the other models just broke even. Seems unlikely.