Critics Go Silent As Tesla Model 3 Preorders Approach 400,000

I think overall interest in the Tesla Model3 will increase interest & sales for the Bolt.

Many more avg consumers will see a handful of Tesla on the streets & begin to "war-up" to the notion of owning an EV or hybrid. If demand increases, it'll be easier to get the Bolt - if brand isn't such as big concern as having any EV is.

Nah, critics haven't gone silent. The media is just smitten with that 400,000 number, and so they're fixated on that alone and think all is well in Tesla Land.

If we look at readily available stats, we should notice the following:

(1) Tesla sold 52,034 vehicles in 2015. They simply aren't able to suddenly produce 400,000, or even 100,000 in a year. That 400,000 unit pre-order that looks great on paper represents about 5 to 7 years' worth of manufacturing capacity, depending on how fast they can ramp up production. In other words, that glowing 400,000 number represents many years' worth of sales, combined into one big number.

(2) Tesla has historically sold vehicles for an average of US$4,000 loss per vehicle. In their last quarter, they were selling vehicles for an average $18,000 loss. Tesla has never made a profit, and according to critical analysts, they've presented no viable path to profitability (AKA viability). Unless something changes in a HUGE way, then at some point, government grants and subsidies, and cash obtained from selling company shares, will no longer be enough to keep them afloat. Oh yeah, add to that customer deposits for vehicles that won't be sold for almost a decade (approx 2 years until the first Model 3 rolls off the line, followed by 5 to 8 years of Model 8 sales at a rate that's equivalent to all of Tesla's combined production today).

I don't know what will become of Tesla in the future, but I'm not certain it'll be all rainbows and fairy dust, like some of today's media outlets are proposing.

Steve, I disagree that Tesla loses money on each car. Does the company post a profit yet? No, but that is because they are still spending a large amount on developing the Model 3, building the Battery Factory, and other necessary items to be able to ramp up production. I don't know the exact number, but Tesla has stated they sell the Model S and Model X for more than they cost to build.

Also, part of meeting the requirements for ramping up production is completing the battery factory, as that is one of the reasons they can't build them faster now.

I own no Tesla stock, have no immediate plans to buy a BEV, but I can certainly see one in my future. I don't think Musk is some super person, and I wish the media would quit labeling him as the Tesla founder. He didn't join Tesla until development of the Roadster was well on its way. That said, he seems to be developing something that the other auto manufacturers can't quite get a handle on.

The most obvious definition of losing money on each car would be if more is being spent than is being taken in. If Tesla is not posting a profit, they are losing money on every sale. Simple math.

Amazon was in the red until 2009. That's 15 years after it was founded...would you bet against them today? Heck, Darringer if you went to a 4 year college, I bet you were showing an aggregated loss for the first 21 years of your life...but if today you can make a profit annually after your expenses, I think the people over at Tesla might have a chance. I don't care if you're opening up a coffee shop, a clothing company, building a building or an international automobile company, there are fixed startup costs and negative earnings until you reach stabilization. Look up IRR, I think it will help you understand how things like capital investments are sometimes evaluated.

Cars don't grow on trees. You need to build big expensive factories to make them and invest billions in R&D to develop them. Tesla's losses stem from the massive capital investment required to launch a new car company. The cars themselves are profitable and Tesla promises 500,000 per year capacity in less than four years. I think it's ridiculous to bet against them but time will tell...

@The Steve

Let me guess - you're one of those supporting Big Oil and the traditional automakers + dealerships by spreading anti-Tesla misinformation and FUD, right?

Tesla is NOT losing money on each car it sells:

No, Tesla Isn’t Losing $4,000 on Every Model S It Sells
http://www.cheatsheet.com/automobiles/no-tesla-isnt-losing-4000-on-every-model-s-it-sells.html/?a=viewall
Tesla Model S Profits: Claims of $4,000 loss per sale are false | BGR
http://bgr.com/2015/08/11/tesla-model-s-profits-4000/
Does Tesla lose $4,000 on each Model S? No
http://www.autoblog.com/2015/08/10/tesla-does-not-lose-4000-each-model-s/

Sorry - No Matter how they attempt to slant the numbers - TESLA has NEVER made a profit - they have ALWAYS posted a loss - and that means that they have LOST money on every car they have produced so far - again as Matt said - Simple Math.

And while a LOT of the loss has been in pre-production costs that they will later not have for the 3-series- the gigafactory - and others - it is not possible for accountants to show a PROFIT on ANY car they have produced since they have never actually made a profit. Now when you total up all the profit and loss (ALL loss) they have had in their existence - and divide by the number of car they have actually delivered (Remember - these deposits are refundable) - the loss exceeds $15,000 per car. It also represents a negative free cash flow of more than that too.

And - while it would seem that having that many deposits would be beneficial when working with suppliers - remember that they have yet to show that they can actually produce the 3-Series for $35,000 MSRP AND make a profit on it. GM and Toyota have already admitted that they expected their battery costs to drop more than they did. AND - I still have yet to see what price the 3-series will eventually hit the street at. I am suspecting it will be closer to $50,000. THey certainly cannot price it low - this time they will have to make a profit to survive - they have already taken in too much seed money and spent it.

As far as the company being worth 3 times FCA - in actuality it isn't worth a dime until it actually makes a consistent profit - the stock price is nothing more than the number of deposits - ie - Outlook - not reality. Jeep alone will continue to be worth more than Tesla for years in reality. And the stock price has NOTHING to do with whether the company is precarious - by definition it is - since it has never made money.

As far as Amazon - it was NOT a manufacturer - and its loses overall were comparatively small compared with the total revenue. They certainly did not approach tens of thousands of dollars per item delivered.

TomM, you should read some of the links above before posting more of your ignorant comments.

And market cap means nothing? Lol. Tell that to wall street. Think their outlook has just a little bit to do with a business' performance.

@MBKing you're one of "those" debaters who when faced with a loss goes "yeah but" and points to something else as if that something else contradicts the truth. What you did was a textbook example of a spurious relationship.

The point being discusses was whether Tesla was losing money on every vehicle it makes.

Tesla IS MOST DECIDEDLY LOSING MONEY on every vehicle it makes because they are operating at a loss which is defined an income being less than expenditures. Therefore they are not making enough on each car to be breaking even or profitable.

The issue of a business losing money to shoulder its way into a market is ONE HUNDRED PERCENT a different issue. And yes, some companies do that, but Amazon's path does not prove Tesla's outcome. You're an utter dolt if you think so.

With disrespect (sic) to Tesla, the 400K "pre-orders" is their reporting of information without independent corroboration and surely a purer-than-the-driven-snow company like Tesla would never be up to shenanigans merely to inflate their stock price.

Elon Musk is a charlatan running a very lucrative swindle, but he realizes that once the EV market becomes viable--and it currently is NOT so--that Toyota, GM, Ford, et. al. will pummel him because literally NOTHING about the technology of his cars is advanced. It's the same old technology that EVERYBODY else has.

Runninglogan1 wrote "And market cap means nothing? Lol. Tell that to wall street."

Market Cap (AKA Market Capitalization) is determined by the formula: Total_Outstanding_Shares x Current_Market_Value_Per_Share (or last traded price)

A share's price is determine by what the trading investor's *BELIEVE*. I might believe a share is worth $200, but if someone is willing to sell for $20, and someone is willing to buy for $20, then the current market value of all shares of those type (e.g., Class A Common) is $20, regardless what I paid for mine, or what I believe mine are worth.

As for what traders believe, take a look at Blackberry (BBRY). Investors believed the shares were worth $144.56 in the summer of 2008, about a year after the iPhone debuted. As iPhone market share climbed and Blackberry's declined, traders eventually shifted their beliefs and stock value adjusted downwards, accordingly. That trend has continued for the past 8 years with few interruptions: the reality grows darker, then investors change their thinking and are less willing to pay the last traded price for the shares.

For the past 4 years, Blackberry has been bleeding red ink, losing customers in droves, and now has smartphone sales with market share of less than 1%, and yet there are still stockholders who believe Blackberry is worth something, and so they trade shares at around $7 (today). As we approach each quarter, there are enough traders to bid the price up (last quarter, up to $9.42) in the *belief* that BBRY might have a good quarter and will turn the game around. After the grim results are released, the stock price declines again. BBRY has no viable recovery plan, continues to lose customers and market share, is consistently running at a loss, and is running out of cash. And yet, some investors cling to the *belief* that BBRY is worth something.

With respect to Tesla, share price (and market cap) reflect what investors *believe*. When they see the 400,000 number, some believe this is the mark of success without understanding Tesla's financials. There is profit to be made is trading shares based on people's beliefs, and some shrewd traders know this! In time, as Telsa shows more and more signs of difficulty, and as investors interpret this as signs of the company being in trouble, the'll be less willing to pay today's stock price of $254, and the stock value will decline.

Remember, the stock value is a delayed response, it's a delayed reaction to what people believe today, based on opinions they've formed in the past. That's why stock price crashes after learning of a scandal, and not the other way around. Remember that people believed in Enron and Lehman Brothers and Nortel, and the stock price remained strong while the companies were festering from the inside out. It surely seemed ridiculous to many to suggest this when their market cap was strong and looking good!

This concludes the lesson of actual stock value.

Darringer - your thought process is very binary and I give it a C- for effort. I challenge you to dig a little deeper in your analysis and ask why, instead reckless comments similar to "Tesla loses money on every car, because the definition of losing money is having expenditures greater than revenue." No one needs a lesson from you, that goes without saying, but investments take time to stabilize. I am under the assumption that you have not started a business or developed a property, which similar to Tesla's situation requires years of negative carry to get into the green.

Taking Tesla's bottom line and dividing by the number of cars sold is the basis of your entire argument and I don't have the time to banter on C- level analysis.

@MBKing The bottom line is the bottom line. It's not the bottom line with a "yeah but" ad infinitum to explain away everything. That is how idiots approach business and lose gobs of money.

Throwing good money away is not how I do things.

By the way, thank you for the complement given that "binary" is the essence of logic.

I have my hand in several businesses and I am most decidedly NOT of the mindset that losing money on a long-term basis is a desirable thing and the MBA that works on my team agrees.

I make money and am ruthless in doing so. I will cut my losses in and heartbeat and sell out of a good thing before it collapses.

The supposed 400K orders are likely vapor. And I would never sink a dime into vapor.

So Elon has pocketed 400,000,000 dollars for offering places on a list? The fact that he is doing this suggests Tesla is as precarious financially as FCA.

Bet you didn't know Tesla is worth more than THREE times as much as FCA and has been for quite a while. Doesn't sound precarious to me.

@runbuh Aside from Tesla saying it has 400K orders, there is no valid independent corroboration. This is 100% Elon trying to get the stock price of Tesla out of the toilet.

Tesla could farm out production to other auto makers.

Ah gigafactory, the one that will be obsolete before it even opens accordng to some analysts..

Some analysts believe the moon is made out of cheese.

The company will lose money and go out of business before being taken over by a Chinese firm.

To all the Tesla haters:

It boggles the mind that you feel the need to bash one of the most innovative American companies in the last century that is trying to help humanity by developing tech that helps to reduce pollution and greenhouse gases and combat climate change.

POSITVT: An atheist and a theist were arguing. The theist said to the atheist, "Why are you so quick to disbelieve?" The atheist said to the theist, "why are you so willing to believe?"

Regardless of what the Tesla bashers say, the smart Tesla investors are laughing all the way to the banks - and the Tesla "greenies" are enjoying their cars many of you are envious of but wouldn't dare to admit. Continue to worship the like of GM and Chrysler, their financial records are not exactly spotless and their cars are no sources of inspiration either.

I think I just read the transcript from the last GOP debate.

Personally, I think Tesla has taken a brilliant approach: Create a high-desire car (Model S) for the wealthy to buy into and for everyone else to wish they owned. Take those profits and create your charging network and build your manufacturing facilities. Then introduce a car for the masses (Model 3). I don't think Tesla would be in the same position today had they introduced an entry-level car first.

Profitable or not, that's not the point. Most, if not all, companies start in the red. If you don't then you're probably not investing for the future and that leads to inevitable failure. it will be interesting to see how it all unfolds.

It will be more interesting to see how brands like Lexus, Mercedes, BMW, and Audi respond. If they play their cards right, they need to create their alternative products to the Model 3 with similar or better range, and figure out a charging network or a technology to expedite the charging process. They have 400K customers just waiting for them to come up with an alternative similar-priced and similar-performing product. Audi recently introduced their A3 e-tron, but the charging capacity and range can't match what Tesla promises which is probably why probably no one even knows Audi offers it.

orders and buyers are two different things.....