Tesla Ignores Q2 Record Cash Burn And Slashes Its Model X And Model S Prices

Tyler Durden's picture

So what do you do when you've just burned through a record $1.2 billion of cash in one quarter, expect to burn an additional $2 billion in capex in the second half of the year and haven't a prayer of generating positive earnings at any point in the near future?  Well, you slash your product prices, of course.

Apparently this is exactly the strategy that Elon Musk has decided to pursue with his Model X after quietly slashing its price tag from $82,500 to a far more affordable $79,500 last night.  Tesla explained the price cut via the following statement:

“When we launched Model X 75D, it had a low gross margin. As we’ve achieved efficiencies, we are able to lower the price and pass along more value to our customers.”

But it wasn't just the base MSRP on the Model X that got a price cut, as electrek points out, Tesla also decided to cut prices on the their Model S and throw in their $5,000 premium package for free.

All dual Motor Model S vehicles also got a slight $1,500 price drop, but the Model S P100D and Model X P100D were the most affected by last night’s changes.

 

Tesla updated the options of the vehicles to add more premium features as standards.

 

The “$5,000” Premium Package is now being absorbed into standard features for top versions of Tesla’s vehicles. Here’s the Premium package and the new standard features on a Model S P100D:

Tesla

 

Of course, as we recently pointed out in our review of Tesla's 2Q 2017 earnings, this is probably the exact right move for a company burning through roughly $13 million in cash every single day.  Here are some of the highlights from our recent earnings review:

One month after Tesla stock tumbled when the electric car maker announced that it had missed Wall Street estimates for the second quarter, delivering only 22,000 vehicles instead of the 22,912 expected, moments ago Tesla reported adjusted, non-GAAP Q2 earnings which beat expectations, with an adjusted loss of $1.33, better than the -$1.88 expected, which curiously was identical to the -1.33 loss in Q1.

 

 

Tesla continued to burn cash, and in the second quarter it outdid not only itself but Netflix too, with a record cash burn of -$1.16 billion - or roughly $13 million per day - almost double what it burned in Q1. In Q3, Tesla's CapEx was $959 million, a number which is set to surge as the Model 3 launch continued well into into Q3: Tesla expects it will burn another $2 billion in CapEx in the second half.

 

 

Understandably, the cash burning behemoth was proud to announce that it had more than $3 billion in cash on hand at the end of Q2. There is just one problem, and this wasn't announced in the letter: Tesla also $3.9 billion in accounts payable and accrued liabilities, as the company drains all net working capital sources of cash it can find. Meanwhile, accounts receivable actually declined. This was the first quarter in which paybales and accrued were nearly $1 billion more than cash and equivalents!

 

 

All that said, Tesla investors don't really seem to care about cash burn.  And, since lower prices will undoubtedly result in a couple extra sales throughout the year, albeit at a cash loss, we're quite certain that investors will applaud this latest move by Musk...genius if we understand it correctly.

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Moe Howard's picture

I'll stick with petrol, thanks anyway.

jcaz's picture

So..... Our cars are selling so well that we're slashing prices.....

Musk is mocking the idea of ever making a profit.  Hell, Elon- why not just give them away?

Interesting, considering he spent the first two years telling everybody that the price didn't matter......

The_Juggernaut's picture

Bullish! Back up the truck.

Buckaroo Banzai's picture

Slashing prices? Man this looks exactly like a bust-out

https://youtu.be/ZXcBvq2Jscw

Lumberjack's picture

Cash for clunkers...8 years too late.

Stuck on Zero's picture

Musk intends to be at the top end of the eventual Pareto curve and his investors are there backing him up. It's a gamble but he just might own the whole market in the end. Carnegie did it. Henry Ford did it. JP Morgan did it.

hound dog vigilante's picture

 

apples & oranges.

 

Carnegie, Ford, et al. were either innovators or visionaries or both.  Musk is neither.

 

TSLA = glorified golf cart.  

 

edit: glorified+subsidized golf cart.

goober's picture

Remember the Tesla dream/illusion was created in the BHO and crew years ? How many other complete fails occurred like Solyndra and many more ? I wonder how much was Tesla funded via the gov one wy or another ? I guarantee if you knew it woud piss you off.

What we are seeing now in many matters is simply the Obama illusions failing because enough time has passed to prove them to be lies, distortions, manipulations and simple illusions created to control you and your tax dollars, to be used against you in a myriad of ways 24/7/365 !

It is all breaking down and many millions now realize it all as simply corruption on a grand scale ! So of course the elite deep state DEM cabal is trying to maintain their control mechanisms over you. They do not want to lose that control or be proecuted for their many crimes ! Nothing new at all in USA today, just more failing, so more tension and resistance to any real boundaries or what we used to call laws.

http://www.downtoearththinking.com/the-war-for-our-minds-.html

So Close's picture

If this brillaint motherfucker rams production up geometrically like he says he will you amnesiatic schizophrenic fucking idtiots will all be falling over yourselves telling everybody, "I told you he was a genius."     You complaining,backbiting, crabby mother fuckers...  please list your life accomplishments compared to the 4 major industries Elon has disrupted.  stfu and go back to your drink.

jcaz's picture

Good plan.  

You sound like a really smart guy.

Help me with the math, then:

Tesla loses $25K on every car it builds-  that's never gonna change;

How many MORE does Tesla need to build to make a profit?

True, my "life accomplishments" don't include running a government-funded tax scam-  what college to I go to for that degree?

So Close's picture

What does the first bar of soap in a 10 million dollar capex factory cost you stupid fuck.  If Opex is 250k a month and prodcution is 1M bars a month what is the all in cost per bar after 5 years?  If the sales price is 2 bucks a bar did the factory make or lose money?  What is the irr?   If you can do some basic 9th grade algerbra substitute tesla numbers into the above.

TBT or not TBT's picture

America is saturated with cars, if you read ZH much(?), and these existing cars keep lasting, and Peak Oil is far in the future, and R's don't like subsidizing projects like Elon's.   

So Close's picture

Market saturation and change in market penetration are two VERY different things. 

Countrybunkererd's picture

What do you think will happen when Volvo is all electric and selling for 1/2 the price?  Do you just change TSLA's timeline for turning a profit from 20 years to 200 ( I should say from infinity to 100xinfinity) years?  Then factor the electric BMW, Mercedes, Lexus, GM, Ford, Toyota...  You know, those companies that have CAPACITY for production if demand ever really does go to electric vehicles.

MEFOBILLS's picture

What do you think will happen when Volvo is all electric and selling for 1/2 the price?

Full disclosure, I like gas cars or hybrids.  At the same time I don't engage in wishful thinking or ignore facts.  There is no evidence that Volvo or Volkswagen, or anybody else will scale electric car manufacturing at a faster rate than Tesla.  Scaling allows prices to come down.

Tesla also has plans to heavily automate, even to the point of buying Grohmann Engineering.  The idea is for automation to displace labor, to then ramp production even faster.  Automated machines will be talking to each other, and these "robots" are gaining in intelligence rapidly.  Musk says that Tesla heavily automated factories will look like the Borg, with almost artificial intelligence in control.  "We do software better than other automakers."  There is some truth to Musk's boast.

https://www.autoblog.com/2016/11/08/tesla-buys-german-company-manufactur...

Most electric car owners are charging their cars in their garages, overnight.  Final piece limiting purchase of electric cars, is range anxiety of buyers wanting to travel long distance, and that means supercharger stations.  Implementation of super-chargers worldwide is continuing apace at a fast rate.  Soon, much of the world will be blanketed with a nearby supercharger station.  Also, superchargers have created a social phenmenon, where people seem to connect with each other.  They hang out and talk and network with each others while their cars charge.  They like this pause in their trip.

Regulatory environment:  China is directing their industry to electric cars by using mandates.  Chinese electric car manufacturers have asked their government to back-off, because mandates are too agressive.  China wants to have cleaner air in their cities.

Self driving cars:  Electric motors with accurate power controllers are more conducive to this implementation.  Musk says that most cars on the road will be self driving in 20 years, that this technology is coming faster than people want to admit.

The people that are buying Tesla stock, are buying into a future vision.  The pieces of this vision are there to see if you look.

 (I don't own any Tesla stock.) 


jcaz's picture

Hardly.  Since Tesla hasn't even made the faintest whiff of market penetration at this point,  there is no basis to even consider Tesla in any market- they're a blip.   If Tesla hits ALL their targets over the next 5 years, they'll sell 1/3rd as many units as Ford did Pintos.

Dude-  your man-crush is walking around his undersized factory talking about his mental breakdown-  pay attention.

Creative_Destruct's picture

Puts the issues in context well. And even IF he makes pentrations greater than that by exceeding targets, the existing auto companies won't sit on their hands as/if the market shifts strongly to electrics. So one question is, can Tesla be viable against the other competion in the foreseeable future at a profit level that justifies the currrent mania? VERY doubtful, whether or not Rad Man continues to grace the world with his god-like presence, satisfying all those with an Elon man-crush.

Huh Reeeally's picture

I see more Maseratis in Toronto than Teslas, so there's essentially NO market penetration here. Our electricty rates have doubled in the last 5 years, so that's a good thing that we're not also subsidizing Tesla owners. Besides, who doesn't appreciate the throaty growl of a Maserati?

goober's picture

So if you realized Tesla was just another gov funded boondoggle would that change your mind ? I didn't think so ! Musk is just another ego maniac not at all unlike Steve Jobs. and jinobs was juist a salesman. Wozniak was the brains. Musk will end up nearly exactly as Jobs , dead from the stress and lies told to create the many illusions. Today we seem to think ego maniacs, sociopaths and psychopaths are the smart guys, they are not ! They are simply the ego maniacs, sociopaths and psychopaths, nothing more.   

jcaz's picture

LOL-  you're precious....

What factory can you build for $10M???

Maybe a soap factory.....  And btw, where did that "$10M" come from, exactly?   Oh right- the money fairies.....

Thank you for demonstrating to all that you don't have the faintest fucking clue what you're talking about;

Good luck with the 4 shares of Tesla you bot at $380-  you're gonna be rich.....

Seriously- quit the boy band, and learn to read an income statement and a balance sheet-  Tesla will never turn a dime of profit in your lifetime, because it never was designed to turn a profit;

You really don't get it yet?   Wow.......

So Close's picture

You are a small minded, obtuse thinking individual.  You have not ability to think at scale, let alone the capability to understand or integrate rate of change into concepts.

jcaz's picture

Your psychobabble is lame, dude- c'mon, head back to Yahoo Financial Chat, I hear they love that garbage over there.....

RU4Au's picture

Doesn't anyone wonder where all the neodinium and lithium are going to come from when we get several companies competing for the rescources. That stuff comes from Russia and China. It's called "Rare Earth" for a reason. Good luck Elon. When people are competing for the stuff your cost per unit is going up, supposing the Reds continue to allow it to be exported to support our hobbies.

Huh Reeeally's picture

Actually rare earth elements are found in some abundance in Canada, large flake graphite deposits too, it's just that China has the market covered right now but that will change as demand increases for manufacturing generally, not just cars. People make a big deal out of lithium but if I recall correctly there's more copper in the car batteries than lithium.

SILVERGEDDON's picture

Unfortunately, North American mining development is constrained by wanting to do so without poisoning the environment - something China doesn't give a fuck about. 

Ever hear of environmental impact assessments and mitigation ?  

Cost thereof ?

Cost and time required to get one of the filthiest types of pollutiing mines approved much less producing ?

I didn't think so, dumb asses. 

Plus - if it is not currently producing, it don't count.

Plus, Teslas run on LITHIUM ION BATTERIES.

You can have all the copper you want - without lithium, you got no fucking battery, and no fucking car.  

Lastly - the fucking 10 trillion ton elephant in the closet - where the fuck does enough electrical generating capacity come from to magically flip the entire world into skittle shitting unicorn fart snowflake nuke the gay whales electric fleet mobiles ???????

All you smug Muskie cheerleaders - shove that up your asses and rotate on it. 

 

So Close's picture

The lithium is being mined from geothermal wells in the Western United States you dumb shits.  Why do you think the giga factory was built where it was?  Google "lithium geothermal brines"

goober's picture

wrong again, the vast majoritiy comes from S.American mining operations here in this hemisphere.

Huh Reeeally's picture

Yep, and all in what is considered to be the safest mining jurisdiction in the world and with what, 80% of all mining companies listed here?

You could check out AVL or a few other rare earth companies, or some of the graphite folks in Quebec, who, I can assure you, have heard of environmental reviews - BTW you left out native communities, funded by Tides Corp which is run by the Rockefellers, and assorted native land grabs and protests - but perhaps you're not familiar with the nuances of the local mine approval process.

If you want a good laugh you should check the British Columbia review process for LNG pipelines and ports... hilarious!

So Close's picture

This is not first time I have heard someone mistakenly conflate 2 syllable, relatively common words with the term, "psychobabble."   Pitty you lack the self-awarness to understand the implications of just how far out of your depth you are in regards to the gestalt of this conversation spefically and the underlying subject as discussed generally.  May i sugest www.diictionary.com  

Rufus Temblor's picture

"Gestalt?"  Now that's funny.  You're living proof that a liberal with a liberal arts major should stay away from investing.  On second thought, keep buying in to Musk the con man's fantasy.  The shorts need more suckers.

So Close's picture

Try maritime engineer who ran nuclear power plants for the US navy sub fleet, has built and sold 3 succesful businesses, has drilled oil wells all over the world, and has a few patents and a few more customers for an industrial waste water cleaning device/business.

VZ58's picture

Look, we get it. You're a genius and the rest are plebes. Go hop to it and change the world with Elon. It's all AMAZING..and we'll all get rich and everything will be green and pigs will fly...

goober's picture

I do not doubt "close" is a smart guy. But ever notice how all supposed progressives always think they are the smartest people even if the most opposite facts are staring them in the face ?

By the way I have one of those rifles, VZ 2008 and they are quite excellent shooters. I wish I would have purchased 10 of them. I only paid $365 for mine new in 2011 or 12 ? That was stupid, but who knew ? Most people had no idea what they were and still don't, but prices have tripled. Intersting how things change and pricing moves with supply and demand. Today you can purchase brand name ARs all over the place for under $500, some under $400. Everything is subject to supply and demand, including Tesla vehicles. Not sure how many have burned up all by themselves ?

HK VP9's picture

So you are Hyman Rickover?

Fuck you, mama's boy. You are nothing but a lying joke, just like your false idol Elon. 

SILVERGEDDON's picture

Better yet, don't use big words out of context - it just brands you as some fucktard lunatic barking at the moon. 

You all probably say " noocklear ", just like that idiot who was President for 8 years too long. 

Instant kick in the nuts accreditation, So Close.  

SILVERGEDDON's picture

Hey - Close boy - you forgot Rocket Scientist as part of your curriculum vitae in your Zero Hedge application as the Robot Trader / Million Dollar Bonus / Fonestar replacement as Short Bus Special School Hockey helmet Wearing Libtard Snowflake Ass Plower Zipperhead. 

OldTrooper's picture

Buddy, you should spell check stuff before posting something like that.  Just sayin...pitty, awarness, spefically and sugest?  

nodhannum's picture

What kind of degree did you get from you american university...gender studies?  You should star in an Al Gore video entitled "Then A Miracle Happens" or perhaps "The Music Man".

Rufus Temblor's picture

But would that be the right gestalt for this conversation, dude?  <sarc>

SILVERGEDDON's picture

I think he already did a movie with Michelle and Barack called " The Little Bummer Boy. "

Joyo Bliss's picture

So, er ... he loses money on every sale but will make up for it on volume?

And ...

Wait till the lithium Ion batts start crapping out. It'll be like the F150 pickups needing replacement 21" + tires - the owner can't afford it anymore.

Doom Porn Star's picture

Well fuck a duck!  My sides hurt!

INdeed.

MOAR please!

Abbie Normal's picture

Okay, let's go down your rabbit hole.  Tesla is still losing money and closing in on its first decade of operation.  How long will it take to break even, let alone make up for all of that accumulated deficit?  The answer is NEVER.

CvlDobd's picture

I'm not defending Tesla accounting or Elon. I do think that Tesla stands to cut that $25k loss per car a great deal if they would bring in a lean specialist and cut the waste in their process. I don't get the impression Elon has it in him to admit anything is wrong or could be improved in their production process.

Huh Reeeally's picture

LOL it's the Amazon Effect, cashflow is king and profit is created by dubious accounting methods. As long as there's money in the taxpayer bank to cover outflows and the message is rosy then it's an easy sell to the common core types.

Pointing out that nuclear waste from power generation is not clean, solar is largely ineffective in 75% of NA and not cost effective anyways since it needs to be subsidized, or the amount of oil that goes into producing all those hi-tech computers, er, I mean Teslas, is a painful thought process for many.

Now then, what's the definition of a ponzi scheme again?

Freddie's picture

Musk is a chosunite Deeep State dual shitizen.  One of those dual shitizens who sold out South African whites and had his bags packed to flee S Africa as soon as the ANC took over.

The Deep State chosunites-dual shitizens include Zuckerberg, Musk, Bezos, Google boys plus Larry Ellison CIA contract programmer who created Oracle.

Musk and tesla will be propped up by Soros, Deep Stte Isrihell, MIC, $tate Dept/CIA- Rita Katz ISIS.

Freddie's picture

Double post. My God - ZH is almost unusable due to pop ups, videos, endless scripts.  I am using MSFT Edge to post.  My Mozila browser logged me out of ZH and forgot my password.