Will Tesla's Fate Determine The Future Of The Electric Vehicle Dream?

[BlackTortoise + 103]

Tesla needs to raise about $2 billion by mid-year to boost the lagging production of the Model 3. Company has already raised about $38 billion of equity and debt over its lifetime. Despite rapid market growth, this company faces major challenges and toughening competition. Musk's financial engineering may not keep his company aloft.  If Tesla crashes to earth, does this mark a dead end for the battery vehicle dream?

[Adam Varga + 123]

I don't know why almost everyone is identifying electric vehicles with Tesla. EVs are much bigger than Tesla or Musk... the incumbent auto makers are no a small threat. 

[Sofia + 35]

Although Tesla sells about 60% of US EVs, this company has a huge competition because all major carmakers have already launched their own vehicles.Now it has to compete with manufacturing size and prowess of Toyota and quality of  BMW. Not to mention mass-market low costs of China's BYD.  Tesla now has to justify its valuation. 

[Guillaume Albasini + 851]

 

 If Tesla crashes you just would end up buying chinese or german EV's instead of Tesla cars.

From a US point of view Tesla seems to be the lone player on the EV ground but on a global perspective it's not true. Huge investments are being made by the car industry in EV technology and the fate of an unique carmaker (even the more renown) can't change the outcome.

By the way I think Tesla will be kept aloft. They have some difficulties to ramp up the production of the Model 3 but the demand is there. I't a temporary bottleneck with supply that can't follow the demand. And it's better to have this kind of problem rather than the opposite.

[Vlad Kovalenko + 115]

If there is one thing Tesla has, it's people willing to give them money. They'll be fine.
The only thing that might stop people investing in Tesla is a failure of the model 3. There's no competitor for Tesla's cars. Their batteries are 2-4x bigger than all of their competitors and their vehicles are more efficient and more powerful. As long as Tesla can actually come through and make the model 3, they're fine. 

[Rodent + 1,424]

Tesla certainly isn't the only player in this field, but Tesla's failure could sour people's opinion of EVs in general, because Tesla has managed to be the face of the electric vehicle movement. It will still happen, with or without Tesla, but if Tesla fails, I think it would be a significant setback. 

[JunoTen + 118]

I don't think so. All major carmakers are going full speed with electrification. I don't think it matters whether Tesla is there or not, especially considering the fact that many countries have announced a coming ban on ICE vehicles sales in an effort to reduce pollution and oil reliance.

Edited May 29, 2018 by JunoTen

[Jan van Eck + 7,558]

Tesla apparently loses money on each car it manufactures, and the sales price does not cover the full costs of manufacture.  Eventually, the company will need to be re-capitalized, and I predict this will happen inside the bankruptcy courts.  Once the current shareholders are wiped out, and the unsecured debt is gone, then the Buyer of the assets (including the Tesla brand, but without Elon Musk) might be able to make a go of it. 

Personally, I have my doubts about Tesla.  The "managers" in production seem to be incompetent, the actual product is ramshackle or shoddy, with body panels not fitting, and the auto (Model 3) has this center-console screen that requires the user to look away from the road to enter a new data point for anything.  The car "looks nice" sitting in the showroom; using it is another matter.  And the numbers don't work.  You cannot run a manufacturing corporation with a cash burn of $500 million a quarter and expect to stay afloat; it does not work that way. 

All that said, I remind readers that Tesla is the most heavily shorted stock out there, I think the short interest is something like 18%.  An awful lot of market players are betting against Tesla; so far, the vast majority of Shorts have been burned.  The stock seems to shake off bad news as if it did not exist.  Remarkable.  You bet against Tesla at your substantial peril.

Will it eventually crash?  It should.  The survival of Tesla is inexplicable.  Yet it just soldiers on. What a crazy world we live in.

[GeoSciGuy + 74]

I think Tesla will be fine.  Yes they are burning through cash, but the company is still relatively young compared to other auto makers.  What's important is that they have considerable EV market share and are building cars that people want, evident in the number of preordered Model 3s.  As stated by Vlad above, Tesla makes cars with larger batteries that are more powerful and more efficient.  Also, Tesla leads the EV industry in software and programming, one of the advantages of being based in Silicon Valley.  

It took Toyota a decade until the Prius was profitable, but that didn't stop Toyota from developing the technology.  

A reason I personally have faith in Tesla is that the Model 3 gets you the most sex appeal per dollar spent compared to other cars. 
Let's take some other luxury brands that sell $35,000+ cars, and tell me which phrase is most successful:  

"Hey, girl!  Want to see my new BMW?"  
"Hey, girl!  Want to see my new Benz?"  
"Hey, girl!  Want to see my new Lexus?"  
"Hey, girl!  Want to see my new Tesla?"  

Let's try that again with other comparable EVs on the market: 

"Hey, girl!  Want to see my new Nissan Leaf?"  
"Hey, girl!  Want to see my new Chevy Bolt?"  
"Hey, girl!  Want to see my new Honda Clarity?"  
"Hey, girl!  Want to see my new Tesla Model 3?"  

As you can see, the Tesla always wins!