Cash flow problems at Tesla? How the business press conveniently forgot how startup operations work

  • Published on November 27th, 2018

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.

Financialization money meltdown


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This struck me yet again while looking at a new chart that a CleanTechnica reader created and shared. The chart is one of many that he created based on official Tesla figures.

Take a look at the base chart first and then you can see my summary of a few key points:

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.

Any other thoughts about this chart or others published on the new “Tesla Investors Dashboard” by our number-loving friend @moesalih_?

(Originally appeared at our sister-site, Cleantechnica.)

About the Author

is the director of CleanTechnica, the most popular cleantech-focused website in the world, and Planetsave, a world-leading green and science news site. He has been covering green news of various sorts since 2008, and he has been especially focused on solar energy, electric vehicles, and wind energy since 2009. Aside from his work on CleanTechnica and Planetsave, he's the founder and director of Solar Love, EV Obsession, and Bikocity. To connect with Zach on some of your favorite social networks, go to ZacharyShahan.com and click on the relevant buttons.