Last month, I wrote about Tesla CEO Elon Musk’s contemptuous and breezy dismissal of questions asked by financial analysts about the cashflow situation at Tesla. Would the company need yet another infusion of money to remain afloat? Lame! Next question.
That was Musk’s response.
As it turns out, it’s Tesla that’s lame. The company – Musk – just laid off several thousand employees, about 9 percent of its workforce – which is one way to raise cash (by not spending it on worker salaries) when you don’t want to admit you need another infusion from investors – or realize you might not be able to get one because those investors are becoming gun-shy about giving money to Elon.
I’ve been pointing out for years that Tesla is a net money-losing operation, despite all the crony capitalist advantages – including electric car quotas in states like California, which force other car companies to either build EVs they can’t sell (or sell at a loss) or buy “credits” from an electric car manufacturer (Tesla) which the electric car company then uses to offset its losses.
Even so, Tesla has lost something on the order of $5.4 billion dollars so far, according to most estimates. Yet – until quite recently – most media coverage of Tesla has focused on what amounts to financial Fake News of the most egregious kind, such as the hype-driven value of Tesla stock. It’s true the stock price zoomed upward like a bottle rocket on the 4th of July. But what was driving this? Economics in One Lesso... Best Price: $2.43 Buy New $7.43 (as of 12:35 UTC - Details)
Not anything of value.
Analysts refused to analyze the fact that Tesla loses money on every car it sells. That it remains in business only because of investor infusions and deposits given on cars that never seem to materialize.
Well, the electric chickens may finally be coming home to roost.
At some point, you either make money – or you don’t. If you don’t, you have to find people willing to give you more of it. When you can’t do that anymore, you are forced to scale back. You let people go in order to husband what resources you’ve still got, in the hope that maybe you’ll be able to ride it out.
Elon is running out of money. His operations aren’t sustainable.
That is the real story behind the mass layoffs at Tesla and it’s still not being told. A healthy and growing company doesn’t have to cut its workforce by almost 9 percent. There will likely be more cuts, too – unless Elon can raise another $1.3 billion or so, which is the sum Tesla is expected to lose over the next four quarters. Moody’s Financial Services said in March that Elon might need as much as $2 billion to keep the doors open another year.
That would bring the total losses to more than $7 billion dollars so far.