Published on November 25th, 2018 | by Zachary Shahan0
Tesla’s Cash Story In 1 Chart — & How Narrow-Minded TSLA Media Coverage Scared You
November 25th, 2018 by Zachary Shahan
You may remember months earlier this year when the financial press and certain analysts obsessed over Tesla’s declining cash balance. Perhaps it was genuine, but my impression is that the obsession over this topic was concern trolling, faux hysteria, and even an attempt to confuse and manipulate the public in the worst cases.
Take a look at the base chart first and then you can see my summary of a few key points:
As you can see, from Q3 2017 until Q3 2018 (or even Q1 2017 to Q3 2018 if you exclude Q2 as an anomaly), Tesla’s cash on hand was dropping quarter after quarter. It looks a bit like a staircase or escalator of decline. That decline was made to sound or look very scary for months on end — and the narrative was easy to continue up till Q3 2018. But as we tried to explain several times in different ways, as did others (including Tesla CEO Elon Musk himself), there was nothing particularly scary or long-term about the trend.
As a reminder, it takes cash money to design, install, and gradually ramp up a new production line. This goes for Tesla, GM, Daimler, Volkswagen, or anyone else. It’s not until an automaker hits a certain level of production that the initial investment “pays off” and the company starts making a profit on the model the production line was created to produce.
And that’s what you see in the bar chart — cash on hand declining as Tesla spends money ramping up production, and then cash on hand booming as Model 3 production hits a certain level.
A rather interesting thing I hadn’t appreciated before seeing this chart is how much cash Tesla has had since Q2 2016 relative to years prior. Clearly, Elon Musk and Deepak Ahuja are not simple-minded newbies to finance and to the automotive manufacturing world. They knew well before the Model 3 was even designed that they needed a good chunk of cash to ramp up Model 3 production and protect against the delays, cost overruns, and just overall uncertainty from “production hell.” Tesla got a boost in capital to cruise through that challenging production period and the capital did its job fine, cooling the concerns of Tesla executives, staff, and supporters even if it somehow made a certain population of short sellers itchy or indignant.
With the bars rising again, though, it is getting mighty hard for short sellers, the conductors behind carefully orchestrated smear campaigns, and thought-deficient CNBC talking heads to scare the general public about Tesla finances and stock. You and I may not have finance or economics degrees, but we can look at a bar chart or 20 and deduce a few things.
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