Report has Tesla putting the bite on suppliers for cash

Discussion in 'The Okie Corral' started by Mr981, Jul 23, 2018.

  1. Mr981

    Mr981

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    https://www.bloombergquint.com/busi...nds-to-help-turn-a-profit-wsj-says#gs.ZBPuKmQ

    There is a larger article on this in today's WSJ.

    The request goes back to payments made to suppliers since 2016. If I'm a supplier I have to wonder how deep I want to get with these guys, rather than send them a check back for what they've already paid. More likely putting them on a prepaid basis.
    Likewise with investors--how do you attract new money if they have to borrow from their suppliers?
    Or--most importantly--customers; would you want to buy a $70k car from a company that has to pass the hat to suppliers to fund operations?

    Another link with some numbers on the company:
    https://www.zerohedge.com/news/2018-07-22/liquidity-crisis-tesla-asks-suppliers-cash-back

    The debt numbers are really huge and they are burning cash to the tune of $12 million/day.
    When you put it all together,I don't know how the operation stays afloat without a fresh influx of cash--and not coming from suppliers.
    -------------------
    Another link on Tesla finances:
    https://www.businessinsider.com/tes...to-worry-the-company-might-go-bankrupt-2018-5

    The burn rate of cash quoted in the Zerohedge article was close to the one used Business insider--$1.1 billion in the first quarter; if you've got $2.7 billion in cash, we're only talking a quarter or two before things could get grim and we're in the start of the third quarter now.
    This won't end well..........
     
    Last edited: Jul 23, 2018
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  2. HalfHazzard

    HalfHazzard Señor Member

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    I’ve been told here that zerohedge is garbage, so I’ll just believe what Elon tweets.
     
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  3. Mr981

    Mr981

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    I did a search on ZeroHedge and the consensus seemed to suggest they paint a pretty negative picture on things in general, so I added a business insider article that was from June.
    The cash flow numbers--free cash/burn--seemed to be in the same ballpark so I wouldn't dismiss this ZeroHedge article completely.
    If either of the articles are even remotely close to what the reality is of Telsa Auto finances, it should come to ahead in the next few months.
     
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  4. rock_castle

    rock_castle Life, liberty, and the pursuit of happiness

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    Take away government subsidies and Tesla goes away.
     
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  5. WeeWilly

    WeeWilly

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    I have a friend who constantly sends me Zero Hedge articles. While a lot of it has roots in fact, many times only the negative potential outcome is discussed, that is, half the possible outcomes.

    In the case of Tesla's cash burn, this isn't just a bone of contention with the political press and Tesla. Most of the highly regarded analysts who follow Tesla believe Tesla is in for a capital raise later this year. Elon Musk insists they will not need a cash raise and has dug in very deep on the subject.

    Companies always go through binge and purge cycles when it comes to cash management. When cash runs low, there are a lot of things companies can do to make cash balances look better. "Working receivables", dragging payables, etc. can make remarkable impacts on cash needs.

    Right now, Musk has charged his lieutenants to stem cash burn as much as possible and also tap as many sources of "cash" as possible to bolster his claims he won't need the capital raise.

    I am short Tesla, betting the street is right about the capital raise and the punishment on the stock price that will follow, but anyone thinking it is a slam dunk on the downside needs to consider, if they can match production rates recently achieved on the Model 3, coupled with the fact they are only shipping the priciest versions, Tesla may actually achieve cash flow break even this year and avert the need for immediate cash infusion. This will be a bad development for someone like myself who is short the stock.
     
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  6. Fixxer

    Fixxer Got ointment?

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    Look at the long game. Government doesn't GIVE anything away, so you might ask why they are working so hard to get people into EVs?

    Eventually it will come to be that EV drivers aren't paying to use the roads. The long game is to get the public accustomed to being taxed per mile (which means monitoring devices attached to our cars and trucks) so they can REALLY make a killing. The whole thing is about more aggressive taxation.

    Sad thing is, they use the 'true greenies' to carry every bit of their water for them.

    I'm all for innovation, and wary of every last thing the government does.
     
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  7. G30SF/F-250

    G30SF/F-250 Pinky Out Platinum Member

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    Alright!!!!!

    Another Tesla thread!!!! :woohoo:
     
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  8. Bruce M

    Bruce M

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    From one of the articles: "...It’s not so unusual for carmakers to ask suppliers for discounts retroactively, and some Japanese automakers have done it before ..." I am not sure that changes how ill or solid Tesla is, but I found it interesting.
     
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  9. powernoodle

    powernoodle

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    Because it is anti-capitalist. Same with the leftist infatuation with solar and windmills. Market forces are removed (because EVs, solar and windmills would never survive in a laissez faire market), and in its place is Uncle Obama and his designees.

    The entire "green" industry, which is not green at all, is just a means of making leftists and leftist bureaucrats feel good by circumventing and thwarting the Free Market. They replace free market principles with central bureaucratic control. You know, like the Soviet Union did before it collapsed.

    This same "feel goodism" is what drives all leftism. Think about the pink AIDS ribbons the loony left used to wear at the Oscars. Feel goodism. No practical accomplishment here in the real world (i.e., HIV was not eradicated by wearing a pink ribbon). Same with "green" industries and electric vehicles. Its all about feeling good, instead of doing good. In the case of EV, capitalism is circumvented via bureaucratic interference, so all the better.
     
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  10. michael_b

    michael_b Elementary, my dear Watson.

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    Tesla is about to pass that threshold. They sold just enough that at their current sales pace the subsidies will end soon.
     
  11. michael_b

    michael_b Elementary, my dear Watson.

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    Also, Amazon failed to show a profit for years. Bezo's famously said, "if we show a profit, we did something wrong."

    He kept reinvesting into growing the company. Shareholder's weren't happy but it paid off in the end.
     
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  12. Mr981

    Mr981

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    Very true, but amazon doesn't make anything--let alone a cutting edge, expensive automobile requiring manufacturing facilities built from scratch.
    Amazon just buys and sells existing consumer products, stores them in warehouses and uses multiple vendors to deliver the the goods. Other than building warehouses around the country, their capitol outlay is mostly on inventory which they really know how to turn.
    Tesla required billions of up front expenditures in plant and equipment to deliver their own product while spending investor $'s. Meanwhile, other car makers have jumped into the fray investing more billions to deliver a similar product.
    China apparently is throwing billions at this same market with hundreds of EV makers being created with seed money: https://www.businessinsider.com/china-continues-push-into-ev-industry-2018-7
    If the trend continues, the EV market is going to be very crowded in a few years and the ones with deep pockets ( and a good product) will likely be the survivors.
     
  13. peng

    peng

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    This is a common practice by every automaker every year.

    I have helped draft the official letters that go out every year to request a percent back of the suppliers sales.

    It also works on the design side where a supplier will cheapen their part somehow and the savings can then be split between the supplier and OEM.

    The design stuff makes sense, but the commercial ask back simply leads to the supplier cleverly adding the giveback to their part or tool quotes which probably in reality makes the part more expensive over time. Oh well it's a fun game.

    If Tesla wants to be a real car company, they may have to do some of the things that real car companies do every day. Unfair for an visionary like Musk but there you go.

    Their real test is when the media decides to hate them for years on end, it seems to be a cycle sometimes. Maybe this is the start for Tesla.
     
  14. thewitt

    thewitt

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    Actually that is not exactly true.

    Amazon pays contract manufactures to build Amazon products, and has a small army of designers, product and process engineers working with these CMs to build their own products.

    Though they have not built their own factory, they are just as much a manufacturing company as any number of manufacturers who farm out their production to contract manufacturers.
     
  15. Mr981

    Mr981

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    What you say is very true and that was a poor choice of words on my part, but in terms of comparison relative to Tesla , Amazon causes people to make things for them and has input in the design on some issues but nothing on the scale like Tesla has to do building factories from the ground up and developing their own product from the ground up.
    This frees them up to be able cut and move quickly with changes in consumer buying habits.
     
  16. ObiJuan

    ObiJuan

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    .
     
    Last edited: Sep 15, 2018
  17. handloader109

    handloader109

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    Interesting story in my paper on Tesla yesterday. Seems the govmint rebate of $7500 drops to $3750 Jan 1st on 2020, and to $1875 July 1st 2020 and totally goes away end of 2020. They collected over $4 billion on presale Down payments for the model 3, but most folks have had a wait of over 2 years with no car in site, most wanted a base car and they are mainly building the higher end cars. Yes govmint check goes a way. So does Tesla kind of line delorean

    Sent from my SM-G892A using Tapatalk
     
  18. ObiJuan

    ObiJuan

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    .
     
    Last edited: Sep 15, 2018
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  19. WeeWilly

    WeeWilly

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    I think the Model 3 deposits raised $400M, not $4B.