An Update from Elon Musk

http://www.teslamotors.com/blog/update-elon-musk

by JGM564 • 14 years ago

380 116 14 years ago

JGM564• 14 years ago

Exciting quote emphasized in post: "we expect Tesla to become cash flow positive at the end of next month."

codex4• 14 years ago

Well, cash flow positive until they decide to develop, test, and manufacture another model, which will again put them in the red. Building cars is a very expensive proposition.

witoldc• 14 years ago

That's why Obama win is so important to Tesla Government Motors.

loceng5• 14 years ago

I think people underestimate what an agile and lean startup like Elon seems to be running can accomplish. He's a super intelligent guy with a growing positive trackrecord. The vehicle industry has been waiting for disruption for 20+ years, and the giants finally have lost control and whatever unnatural advantages they tried to maintain. Technology for electric vehicles will only continue to improve, and costs will go down. Luckily for economies very attached to oil they can shift to systems like free re-fueling once a vehicle is purchased; That's pretty incredible and something I never even thought about or imagined possible, though it makes sense and works once the puzzle pieces are all in front of you. P.S. Elon's my new Man Crush.

toomuchtodo4• 14 years ago

So I'm not the only dude with an Elon Man Crush.

I'm off to go buy a ton more TSLA stock. And apply at an Elon company. Doesn't even matter which one.

knodi• 14 years ago

I truly believe TSLA stock is a good investment. TSLA is on its way to be the Apple of car manufactures.

$ whoami > nobody

loceng5• 14 years ago

In the next month I'll be dumping money into getting a patent. Time will tell if that ends up being a better investment than into Tesla. Maybe I should try to get Elon as an advisor / investor. I'll have to hope to not get giddy when speaking to him if there's ever the possibility ...

sliverstorm• 14 years ago

whatever unnatural advantages they tried to maintain

You think it's unnatural that heavy industries has fewer players than, say, fast food?

codex4• 14 years ago

I'm not sure a company that is losing $30M a month (or $400K per year per employee, of which there are 900) can be classified as lean--and possibly not agile, given that they spent a fortune creating the Roadster only to abandon it three years later as being too expensive, having sold only 2K copies. I'm sure it was a learning experience, but Tesla's burn rate is only increasing, so I hope they learned enough.

And, while SpaceX's rockets are undoutably advanced and very safe, they aren't currently the cheapest cost per pound sent into LEO; that honor belongs to the Russians:

http://en.wikipedia.org/wiki/Comparison_of_orbital_launch_sy...

SpaceX has some cheaper launches "in development" but they've already revised their initial prices upwards of 100% of what they claimed early on for their operational launches, so you really can't trust what they claim for in development vehicles.

chintan• 14 years ago

What a timing - "Romney Calls Tesla a ‘Loser’" in first debate: http://www.wired.com/threatlevel/2012/10/romney-tesla-loser/

reitzensteinm• 14 years ago

That makes me think that the DOE wanting to accelerate the loan repayments was a purely political decision.

Wasting money on Solyndra in this economy makes Obama vulnerable - using Telsa as a success story would go far to mitigate that, and news of accelerated loan payments is soundbite-y enough for that purpose.

cantankerous• 14 years ago

I read it similarly, though I saw it more as the DOE having an "oh crap" moment and wanting to get itself out from under these loans that have been at the center of controversy and get back under the radar. I'm not sure how much micromanaging is going on when it comes to these loans from the White House, but I would bet that the heads at the DOE don't want any more heat.

klinquist• 14 years ago

Paraphrasing Chris Sacca, Elon Musk is one of the most under appreciated entrepreneurs of our time. Talk about someone willing to tackle the impossibly big problems...

aik• 14 years ago

>> Elon Musk is one of the most under appreciated entrepreneurs of our time.

I'm sure his time will come (already starting to). He's built and talked, but other than Paypal the world hasn't yet in a huge way reaped the benefits of his labor. With Tesla and SpaceX both (somewhat recently/soon) reaching a point of having products in heavy use, it'll come soon I'm sure.

Though maybe he should have some reward for attempting to tackle the big problems as well.

001sky2• 14 years ago

Romney then name-dropped a few beneficiaries including the bankrupt solar panel maker Solyndra and Tesla Motors, the car maker that has gotten a $465 million loan from the Department of Energy, which it is paying off.

Romney then quipped that “One of my friends said, “You don’t pick the winners and losers. You pick the losers.”

--(1) They defaulted on a fed subsidized loan[#]; (2) They make $90k cars for rich people; (3) US deficit=$1Trillion, US Debt = $16.X Trillion. (4) Item (3) is spread pro-rata amongst the poor people who can't afford Teslas. Their pro-rata share of the debt is a nice chunk of their mortage payments (5) SV is flooded with cash. Tesla does not need US handouts, subsidized loans and other craptrap. If the biz/product is a winner it will do fine.

________

[#] Technical.

mkramlich4• 14 years ago

> Tesla does not need US handouts, subsidized loans and other craptrap. If the biz/product is a winner it will do fine.

If that's truly your belief, let's carry it out across the board to be fair and complete. No more subsidies, exemptions or bailouts for banks, Wall Street, oil companies, mining companies or religions (via income tax exemptions). Oh that's right. Those are approved and supported by the Republican party. So those are perfectly ok.

But if it is about say solar, wind, tidal, or geothermal energy, or about science, education, helping the unemployed, the sick, disabled, elderly, retired -- those are what we should be spending less on as taxpayers and just let nature take its course. Let the "market" decide the winners and losers. If they can hack it on their own, the market will reward them with enough cash. Otherwise they die. There is absolutely no other long term consideration we should be taking into account, no strategic concerns, no follow-on effects, no externalities (those don't exist in a proper capitalist/rightwing/libertarian mindset, it seems), and certainly no moral considerations to be had. And there is no such thing as climate, ecosystems, or species other than humanity or the ones we pet or put on our plates -- that's liberal hippy talk. Science? A thinly-veiled conspiracy against my Bible. Also there's no need for any business or startup to ever do any R&D spending up front that doesn't have an immediate return via product revenue. That's just insane and asking for trouble. Any new idea must be profitable and able to stand on its own legs in year one, on day one -- nay literally within moments of conceiving of it. Period. No exceptions for ramp-up time, for execution risks, experimentation, taste shifts, refinement, pivoting, serendipity, or market events beyond one's control. That's all weak-minded liberal talk.

$500M loan to one particular solar company that folds? Travesty. Trillions spent on unnecessary wars in Iraq and Afghanistan started by the last Republican administration? Crickets chirping because apparently perfectly ok. Chance a few more blacks or elderly or college students might get to vote -- and not for the candidate I want? Tragedy. Billionaires now being able to spend effectively unlimited amounts of cash to flood media with dishonest ads backing their favored candidate? Perfectly ok. Because the market is always right. Government always eeeevil (eg. Social Security, teachers, firefighters, roads, libraries, schools, defense). Market always guuud (eg. Enron, Deepwater, Goldman Sachs, AIG).

droithomme2• 14 years ago

Musk's public statements are the nicest and most logical ones I've seen made by a modern CEO. No sense of spin. Always a pleasure to read.

loceng5• 14 years ago

He's grounded, confident. Great role model. I hope he continues to be relatively transparent and lets us get to know him more.

hristov3• 14 years ago

Ok, even though i am generally pro tesla and like musk, in order to prevent this from becoming a total worshipfest i will provide some facts that elon is not sharing.

It is true that tesla has made all their payments under the doe loan agreement. But they were not in total compliance with said agreement. The agreement required that tesla keep certain financial ratios up to certain levels, and tesla failed to do that. As a result, tesla asked trhe government to change the terms. The government complied but wanted something in exchange. What they wanted was early repayment of their loans. That is why he is talking about early repayment. And that is probably one of the reasons why they raised extra money (although elon is unlikely to admit that).

So that is the full story. It is no big deal, i think tesla are very unlikely to default on the loan, but elon was definately not giving you all relevant info.

droithomme2• 14 years ago

Oh definitely so. But his statements have no sense of any of that, one would never suspect anything is being withheld, they come across perfectly sincere and warm and from him and not from some lawyer, it's masterful.

Yeah, there's some dodgy stuff, a lot of information about these cars, such as the reality about their batteries and how much energy they really use to go from A to B over time has high spin when I start looking into details. Was genuinely surprised.

Thanks for the details about what the financing is really about, that's very interesting info.

ealexhudson• 14 years ago

He specifically mentions the 9-month to 6-month escrow switch in the post; are you talking about something different?

QuantumGood• 14 years ago

Well, he seems to address this directly where he states:

"We did suggest that holding nine months worth of principal payments in advance in a reserved account was a bit extreme and, moreover, was never part of our original loan agreement. The DOE agreed and reduced the advance payment reserve account to six months."

You saying

"keep certain financial ratios up to certain levels, and tesla failed to do that. As a result, tesla asked the government to change the terms"

...doesn't seem to add to or contradict his statements.

So unless you can clarify, your statement that "that is the full story ... elon was definitely not giving you all relevant info." seems inaccurate.

intended3• 14 years ago

I don't know much about him as a person and as a speaker, but his first few paragraphs flagged my BS meter at "!full disclosure"

From experience with 10-Ks and working on/seeing how financial documents are massaged, this felt very similar.

ninja Edit: grammar/language.

kimmiller2• 14 years ago

Really? Disagree entirely.

This seems very straight-forward.

foobarqux• 14 years ago

I get the impression that Tesla becoming cash flow positive is financial engineering. Do you have any idea how that would be done in the case of Tesla or in general?

waterlesscloud2• 14 years ago

The sentence "I don't know how to state this more clearly." is a minor mistake.

I often say things like that, and it never works to my benefit. I'm trying to cut it out. It indicates frustration with the audience, and it almost always comes across that way.

revelation• 14 years ago

Well, he probably is frustrated. I'd be if I had to take time out of my work to respond to something that amounts to some bizarre political pissing contest.

Having to justify a 500m loan to a pioneering technology company in one of the biggest recessions? That's a rounding error compared to the billions spent on rescuing failed banks or in researching fancy new ways to blow stuff up.

(Sorry, I, too, am frustrated.)

netcan• 14 years ago

There are a few comments here regarding disclosure & such.

Still, I think it's amazing how much speaking with the voice of a person stands out in a positive way. It's similar to the impact that a Warren Buffet shareholder letter has. It's describing an enormous conglomerate/investment-fund/financial-institution/holding-company, but it's being described by a person and its being described for you.

We are so used to things that sound like they are written by institutions for other institutions, that when something sounds like it was written by a person for people, it stands out.

newbie12• 14 years ago

Really? All of that wordsmithing is saying how he is technically defaulting on the loan from U.S. taxpayers. The loan is now "repay us someday, if you have the cash". Total spin.

mkramlich4• 14 years ago

false

jpdoctor• 14 years ago

> No sense of spin.

What?! FTA: we expect Tesla to become cash flow positive at the end of next month.

However, given that we do have a global supply chain and that floods, fires, hurricanes or earthquakes can cause supply chain interruptions and halt production, we thought it would make sense to raise capital to protect against such an event.

Translation: "So we expect to be cash-flow positive, we won't spend the money that we raised, but we'd thought we'd go ahead and dilute the shareholders, you know, just for insurance."

I believe actions not words. The actions are: He raised money and diluted. You don't do that when you are flush with cash.

grinich• 14 years ago

It's insurance. What he's saying is that the company is fragile right now, and any blip could very seriously harm their growth. The fundraising is a direct response to that risk analysis.

Otherwise, they would probably raise money later for a specific project requiring lots of capital (like a new vehicle, as mentioned).

wtallis• 14 years ago

"You don't do that when you are flush with cash."

How do you jump from "we're almost cash-flow positive" to "we're flush with cash"?

And isn't Tesla's situation a little too tenuous for them to be feeling sorry for diluting their shareholders? Making viable electric cars is their priority - not making their investors rich ASAP.

eldavido• 14 years ago

"Nonetheless, we have a duty at Tesla, having accepted this loan as a portion of our capital, to repay it at the earliest opportunity."

Not sure why Elon and a lot of SV entrepreneurs feel this way. You take a loan; if it reduces your weighted average cost of capital, you roll it and/or pay it slowly. As a Tesla shareholder, I hope such cheap financing remains in place as long as possible to maximize shareholder return on equity by keeping cost of capital as low as possible -- and by improving Tesla's cash position (helping it to operationally succeed) to boot.

Another guy thinking about buying Tesla stock.

karamazov• 14 years ago

The spirit of the loan was to help a promising company make progress on its technology. By repaying the loan early, the DOE will be able to make more loans out of that fund to other such companies. This might not minimize Tesla's cost of capital, but I'd say it's the right thing to do if it doesn't add undue risk to the company.

intended3• 14 years ago

No you would never do this.

Right or wrong as a matter of managing your finances this is just not something a competent CFO would allow on his watch.

You accepted a loan, the loan originator had some terms and you are both in compliance and acceptance of those terms.

There is no rational or financial reason to make that choice.

I understand doing good, but there is a consistency in the choices firms which do good make. This is inconsistent.

reneherse• 14 years ago

I'm a huge Elon Musk/Tesla/SpaceX fan, and have often felt it would be the ultimate opportunity to work at either company (Tesla would be my first choice, as automotive interface tech is one of my passions).

However, doing a quick bit of research earlier today, a search for "Tesla working environment" turned up more than a handful of reports by former and current employees that hint at an unpleasant company culture. Six to seven day workweeks, below average compensation, hyper-political management, management that is quick to fire, and a generally chaotic environment. These factors seemed to be reported even by folks who cited other benefits such as a high degree of autonomy and the opportunity to work with other highly passionate top level engineers on important emerging technologies. One additional oft-repeated concern was that the pace at which Tesla works its engineers is unsustainable, and will lead to burnout for lack of work-life balance.

Can anyone closer to the Valley than I am comment on whether these concerns ring true? And how does this compare to work at other highly innovative and passionate industrial startups?

Elon's explanation of the latest round of fundraising is welcome news, and personally I'm gunning for Tesla to become the Apple of the auto industry. (I plan on buying stock as soon as I'm able.) Is there anything we can infer from these employee reports about the health of Tesla's organizational core/DNA, and what effect that might have on the company's prospects for long term success? [Edited for clarity]

richardw• 14 years ago

I'm guessing, but the culture clash might come from an intersection of "car factory" meets "startup mindset", with the latter introducing an against-all-odds urgency. If you want to put a rocket in space or create the first viable electric car company, you probably can't initially go home at 5pm. You're probably less forgiving of those that can't keep up with the insane pace.

Here's hoping it calms down, and that the people who helped make the vision a reality are well rewarded.

potatolicious• 14 years ago

Hogwash. If you can't do something at a sustainable pace, you can't do it at all.

In startup environments crunch time has a nasty tendency of becoming normal time, and you get nosediving morale, massively increased attrition, and lower overall productivity. It's lose-lose all around.

So sure, in a startup you'd expect some late nights. When late nights become the norm though, you are now officially in dysfunctional company territory - don't let naive founders with rainbows and unicorns in their eyes convince you otherwise. Very sick of this Valley attitude that you must push yourself to the very edge of death-by-exhaustion to achieve anything worthwhile.

cantbecool• 14 years ago

Don't let a few postings online deter you from applying to work for a company that you find intriguing. Just ignore the naysayers and give it a shot. That's the only way of finding out if you would enjoying being a part of something. It's a startup pushing the boundaries of technology within two industries, there's going to be a few sleepless nights, but in the long run you will definitely be part of something massive, which could evidently change humanity as we know it.

jessep• 14 years ago

I have a bunch of friends who work at Tesla. They do work hard, one of whom works waaaaay too hard, but it's meaningful work. They're changing the world.

It's a similar feeling I get from people I know who work at Apple.

waterlesscloud2• 14 years ago

Nothing wrong with working hard, but the "below average compensation" is something to look at a bit more closely.

coliveira• 14 years ago

I understand the geek/social effect of saying that you work for Apple or any other well perceived company, but get real: you're no changing the world. You would change the world if you were one of the first few employees at Apple, or nowadays if you are a high ranking executive/manager. Other than that, you're just a small piece in the engine. Maybe an independent developer is doing more to change the world than an employee at Apple.

sandieman• 14 years ago

Apple employees were overworked harder then anyone.. What is your point?!

mmariani• 14 years ago

I don't know why you've got some down votes on your comment since you just pointed out the truth.

Many of us here are founders and we're in business to challenge status quo and possibly make a dent in the universe. That takes hard work from founders AND contributors.

If anyone thinks things should be different in startup business, they should take a step back and really evaluate how much hard work really goes into achieving these goals.

After that if they can't see no compelling reason to do it, they should just get a job in a more traditional business. I don't blame people for taking that route. This business isn't for anyone.

mtgx• 14 years ago

Sounds a lot like Apple.

lkozma• 14 years ago

I know nothing of Tesla/SpaceX, but be aware that how glamorous/hip a company/industry/etc is, often correlates negatively with how well they treat employees by objective measures, i.e. working hours, salary, etc. Just read some posts about the gaming industry. It's supply and demand, really.

stephenhuey• 14 years ago

I was going to assume everyone is happy there since they should realize when joining that they're facing big challenges, but I was surprised to see so many disgruntled people on Glassdoor:

http://www.glassdoor.com/Reviews/Tesla-Motors-Reviews-E43129...

Tough to say what the stories were behind all of these, but I can see how they might feel the need to push people way harder than normal, because during yesterday's presidential debate Romney lumped Tesla in with a list of losers that the government has given money to. Plenty of people are expecting them to fail even though many of us are excited at their prospects. In such an environment, I can see how Elon Musk might push some workers beyond what they can handle. However, I'd expect many of them are still happy to be part of the team even though the work is hard, because a Tesla employee really is part of something more world-changing than an Electronic Arts coder is.

JonLim• 14 years ago

I'm pretty sure Elon Musk himself said that he works his Tesla employees hard - he asks for people who are passionate about their mission, and that they know that they will be taking a pay cut, as they are a startup, in exchange for being worked to the bone.

It's not that he created a bad culture, I think he just hired people who were willing to take a risk with Tesla, and they work hard to produce a successful company.

uvdiv• 14 years ago

Maybe they should unionize.

tryitnow• 14 years ago

Work/life balance? If I worked at Tesla I'd have a very hard time going home in the evening. I think exciting companies attract people who just keep going that extra mile.

Getting out of work at 5pm kind of defeats the purpose of working at a company like Tesla.

codex4• 14 years ago

As of last quarter, Tesla had $777M in assets and a whopping $715M in liabilities--leaving a net balance of only $64M.

Given that their balance sheet is decreasing by an extraordinary $30M a month, that would have left only two months until the company was insolvent. No wonder the U.S. government wants their $465M paid back more quickly than planned.

The company has lost over $850 million since being founded in 2003.

westicle• 14 years ago

That isn't actually what "insolvent" means. Insolvent refers to a situation in which an entity is unable to pay its debts as and when they fall due. Not whether they have a positive or negative asset position.

Strictly speaking, the balancesheet is irrelevant to Tesla's solvency.

My tennis club owns a property worth $20m from which it operates. It has debt of only $1m and repayment obligations of $100,000. It generates net revenues of $90,000. It is insolvent, with net assets worth $19m.

My startup technology company has no assets other than goodwill and intellectual property. It has no revenues. It has a line of credit from a financier sufficient to cover all expenses. It is solvent, with $1m of net liabilities.

codex4• 14 years ago

"Insolvent" can be defined either relative to cash flow or to the balance sheet; from http://en.wikipedia.org/wiki/Insolvency:

"Cash flow insolvency involves a lack of liquidity to pay debts as they fall due. Balance sheet insolvency involves having negative net assets—where liabilities exceed assets. Insolvency is not a synonym for bankruptcy."

csomar• 14 years ago

Nope, your tennis club is not "insolvent". It's illiquid. It means it doesn't have cash but enough worth to take pay his obligations. At least, that's what Sal has explained in his KA videos.

jordanb• 14 years ago

> The company has lost over $850 million since being founded in 2003.

I seem to recall that it takes the big 3 on the order of a billion dollars to bring a new automobile model to market. That includes the engineering, marketing, and the cost of tooling in the factories.

With that in mind, 850 million dollars doesn't strike me as being all that much capital for creating an entirely new automobile company.

mkramlich4• 14 years ago

> The company has lost over $850 million since being founded in 2003.

Lost? Literally? Since it's been lost I'd love to be the guy that finds those money bags laying around somewhere. But seriously, I'd suggest rather it's been spent, and probably spent mostly on R&D, which is precisely what any reasonable observer would expect an innovative new electric car company to be doing. Musk said even today I believe that within a month they appear to be headed to cash-flow positive. That's a huge good milestone for a new company to achieve, even more so in a bleeding edge one as theirs. And they've already built, sold and shipped 2 models of new product already, in customer hands. That significantly de-risks them. Completely de-risks? Of course not. But if you look at accomplishments to date, their momentum, and the degree of talent on board, I think the smart bet to make on them is up/long.

anovikov• 14 years ago

Hope some good news come on SpaceX, too. What's up with F-H with its so dubious payload figures, especially for high energy trajectories? How's the cross-feed system is coming along (if it haven't been dropped yet)? Where is the 'super efficient staged combustion methane engine' you mentioned a year back, any idea what thrust class it is and what is the fuel combination?

confluence4• 14 years ago

I've been 100% long TSLA since the beginning and really don't understand the reasoning behind the doubts people have - given how little they actually know about a) the car industry and b) electric batteries and c) the ability to think on first principles and not by analogy. But I guess everyone has the right to an opinion - even if most of them aren't a) warranted b) backed up or c) logically reasoned.

We are past peak oil. Battery tech will reach oil parity within the decade. Solar PV will reach grid base line within the next 2 decades. Fusion will be introduced within the next 3 decades. Electric engines already run 92% efficiency (vs the combustion engines 15%) and global warming externalities are finally being priced.

The electric car is a no brainer (it wasn't a decade ago, and it'll be too late a decade from now) just like the electrification of trains were. This company will electrify suburbia and reduce costs while they are at it.

Timing + skill = Very nice stock returns (timing is about 10x more important).

Disclaimer: Goes without saying - I am long TSLA and will continue to be long for the foreseeable future.

aidenn02• 14 years ago

Battery tech will not reach oil parity within the decade. Oil parity would be batteries with roughly 1/3 the energy density of oil (maybe 1/4 if you factor in the fact that electric motors are lighter than ICE motors).

Predictions are hard, but I'm going to go on the record (and am willing to wager) saying that the batteries in EVs produced in 2012 will have an energy density lower than 9MJ/L.

Ultimately that doesn't matter though. The ED in the Model S is already almost good enough, it's the cost that matters, and I think that will go down. If you end up having a car that is a bit bigger and a lot heavier than an equivalent ICE car would be, you can still sell it.

stcredzero2• 14 years ago

> If you end up having a car that is a bit bigger and a lot heavier than an equivalent ICE car would be, you can still sell it.

The Tesla Roadster was heavier than the Lotus car it was based on, but had quite respectable performance. That fact, combined with the electric car cachet was enough to sell it.

If they can keep putting the batteries in the floor, they could consistently wind up with a roomier and more versatile vehicle than the equivalent ICE car. Then again, what Ford is doing with Ecoboost is very impressive. I suspect there's a lot of untapped potential for different form factors with ICE technology.

confluence4• 14 years ago

See here http://evworld.com/insider.cfm?archyr=2012&nextedition=3...

ta121214• 14 years ago

You had me until fusion. As nice as fusion is on paper, there is so much cheap coal in the ground that it is economically unfeasible.

wes-exp• 14 years ago

You know what's economically unfeasible? An unstable climate created by forever burning coal.

confluence4• 14 years ago

See here http://en.m.wikipedia.org/wiki/ITER

pge• 14 years ago

Given your thesis here, why do you think electric cars such as the chevy volt and nissan leaf have had such disappointing sales numbers? I was hoping that those two cars would be the beginning of a mainstream adoption of electric cars, but the car-buying public seems not to have embraced them. Curious if you had any thoughts why?

confluence4• 14 years ago

Because they suck.

Specifically their range - you must appease consumer's range anxiety otherwise you have a golf cart on your hands. Tesla does this.

Furthermore have you seen those cars? They are essentially undifferentiated from their ICE counterparts.

tatsuke95• 14 years ago

Not sure if anyone else noticed, but Romney made a crack about Tesla (in the same sentence as Solyndra) as a useless pet project that Obama subsidizes.

I wonder how this will play out politically, especially if Tesla gets into trouble financially. That story is already being spun.

debacle• 14 years ago

> we expect Tesla to become cash flow positive at the end of next month.

Never in my wildest dreams did I expect that to become a reality. We truly live in amazing times.

MattGrommes• 14 years ago

Sarah Lacy did what I thought was a great hour-long "Fireside Chat" with Mr. Musk: http://pandodaily.com/2012/07/12/pandomonthly-presents-a-fir...

It's well worth listening to.

An Update from Elon Musk

Related Stories