Originally Posted by
tdracer
The other side of that is Tesla lost over a billion dollars in the process (~$700 million 1st quarter, ~$400 million 2nd quarter). More worrisome is that, while they delivered more cars in the 2nd than the first, income was down by a billion dollars. In short, Tesla is having to cut prices to maintain demand, when they are all ready selling for less than their costs of production. Not even Musk can keep that up indefinitely...
Not quite. With a company in growth mode, we have to look at the reason behind the numbers. Tesla actually has positive gross margins (around 20%); they are making money on each car sold. And their revenue jumped 60% compared to last year, which is remarkable since the bulk of the federal subsidies expired last year.
So why the big loss? It's largely because Tesla is making major capital investments to expand: building a new factory in China, preparing for another in Europe, and in developing a brand new car (Model Y). They also took an accounting charge to restructure their sales channel (going from a dealership model to primarily online sales).
For sure Tesla has a lot of risks. E.g., the high-end Model S is getting old and will need a design refresh. But if we dig deep, then we that Tesla's free cash flow actually swung to positive this quarter. And despite all the capital investments they're making, Tesla will likely become profitable (again) this year. Plus with $5 billion cash in the bank, they have some wiggle room to spare.