Photo: Flickr, CC
What Does This Mean for the Electric Car Maker?Tesla might be delighting small children with its products, but it's another story for its shareholders so far: The company has just reported a loss of $34.9 million in Q3 of 2010, compared to a loss of $4.6 million in the same quarter last year, and revenue fell to $31.2 million from $45.5 million. That can be worrying if you take the short-term approach, but how is Tesla doing if we stand back a bit more?
Photo: Flickr, CCPutting It All In Context
While it is always better for a business to be increasing revenues and profits, Tesla is in a special position that doesn't make its financial problems too surprising. First, the financial crisis and world recession has reduce the supply of people with enough extra cash on their hands to buy one of Tesla's rather expensive cars. Second, we're rapidly approaching the launch of other competing electric cars -- people who just want an electric car and don't particularly care about having a super-fast and sexy one might buy a Nissan, GM, or Ford instead. Third, the Model S isn't ready yet to allow Tesla to compete at a lower price point, and building the manufacturing capacity for the Model S requires big capital investments (buildings, machinery, software, employees, etc).
The timing of all this means that there's a lot of money coming out of Tesla, and not that much coming in from product sales (they did get many infusions of cash from government loans, the IPO, and partnerships). The real test will come when the Model S starts rolling out of the assembly line and into dealerships (in 2012, if all goes well). We'll see if all those investments start to pay off and allow the company to sustain itself and plow back the profits into more R&D; and production capacity, or if it stays in the red and then needs external help to rescue it.
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