Elon Musk is the brash CEO of Tesla Motors, and he has been known to make some bold statements. Whether he's talking about the price of li-ion batteries in the coming years or when his own company would deliver the now-available Model S all-electric sedan – to say nothing about leaving the planet with SpaceX – he thinks big. He's usually entirely optimistic, but recently he was downright cautious. Speaking at the National Clean Energy Summit in Las Vegas, he said that:

The challenge that Tesla faces over the next few months is scaling production enough to achieve a certain gross margin on our product so we can be cash flow positive. That's extremely important. If we're unable to do that, we'll enter the grave yard with all the other car company startups of the last 90 years.

Sounds like Musk is saying that if Tesla can't ramp up production to meet certain internal targets (we'd guess something around the previously mentioned 5,000 units by the end of 2012), then the company could fold. As GigaOM put it, getting to 5,000 in the next four-and-a-half months, is "like the Monster Truck version of ramp ups: totally extreme." Combine this drive with the pressure to not make any mistakes, and you've got the ingredients for another Musk quote. From the Summit, he said, "It'll definitely be a very tough road over the next 6 months. We can't afford to make a lot of mistakes."

Six months, four and a half months, a few months, what's the difference? The real question is whether Tesla can achieve the goals that Musk himself says are vital to keep the company out of the automotive graveyard.


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  • 105 Comments
      Gabbo
      • 2 Years Ago
      This is assuming no "crises" occur that would require expensive recalls and fixes - doesn't sound reasonable to me to expect perfection. Buying this stock seems to be an absurd risk.
      Letstakeawalk
      • 2 Years Ago
      Here's a nice write-up that includes the rear suspension: "The rear suspension (below) is multilink with a lower A arm and upper lateral arms and coilover shocks. The main lateral arm is above the drive shaft, and the other lateral arm is in front of it, also functioning as a toe and camber control link. The upper lateral arms are actually short, wide extrusions which have been cut transversely. Each a little work of art, the lateral arms have gentle radii inside and out and trusses that gracefully follow the lines of force. The rear lower A arm has a pronounced tilt up toward the front of the car, which is an anti-squat geometry. The rear A arm is actually an H shaped casting." http://www.jeffchan.com/cars/ev/tesla/model-s/
      Rotation
      • 2 Years Ago
      purrpullberra: Having almost all the parts on hand (or even all of them but just not able to assembly them fast enough) is actually worst case scenario, because that means you have outlaid cash quicker than necessary and are taking it in slower than expected. Not having any extra parts on hand is the leanest, least cash-intensive situation, no matter what the final production rate.
      Nick
      • 2 Years Ago
      Here's what I don't understand: The Model S was launched 'as scheduled'. Now they're sweating bullets, scrambling to get 5000 built by the end of the year. If it started "as planned", then why the sudden stress?
        DaveMart
        • 2 Years Ago
        @Nick
        Musk made clear, in his words, that they have been red-lining it for ages on Tesla. It is true that this is pretty much crunch time though. Going to production always is, unless the company has folded before then.
      me
      • 2 Years Ago
      It seems you guys don't get it Musk is a smart man ... what better way to rally the workforce than this?! Tesla is fine relax
      • 2 Years Ago
      Do the math! A Tesla has less than 100 parts. A typical gas cars has thousands! You should be able to put them together about ten times faster.
        Rotation
        • 2 Years Ago
        Cars are produced with subassemblies. For example, they make the ICEs in another plant and then just drop them in. So it doesn't matter how long it takes to make one. Also, I cannot see how the Tesla has less than 100 parts. Even if you don't count the thousands of batteries. The drivetrain is simplified, but the other stuff is similar. Heck, the rear suspension has at least 20 parts per side. Also, fun fact, the rear suspension is not a double wishbone, at least on the chassis in the showrooms. This despite what Tesla says. Still looks like a nice suspension, but it lacks a lower wishbone.
      Grendal
      • 2 Years Ago
      @Marco Well said and well reasoned. Elon is far from being a perfect human being. But he is a charismatic businessman, somone who gets things done, and has an ego large enough that failure is an anathema to his sense of pride. I wouldn't bet against him and I have bet for him. If it's possible for Tesla to succeed then Elon will find the way to make it work and all indicators are that while they are stetched thin that they should be able to pull this off. So I expect they will. But I'm the optimistic side of the argument...
      Grendal
      • 2 Years Ago
      From oktrader: BTW: TAQA, the Abu Dhabi sovereign fund you referenced, has divested all of their TSLA shares (77% profit). From Reuters: [TAQA said it had sold the 7.3 million shares transferred to it by the Abu Dhabi Water and Electricity Authority (ADWEA) in December 2010. "While TAQA respects and has admiration for Tesla's vision, technology and products, Tesla was a non-core investment for TAQA that was originally made by ADWEA and transferred to us. We hope to use the profit to pursue energy opportunities in the MENA (Middle East North Africa) region," said a TAQA spokesman. ] From me: So the shares they got from Daimler and ADWEA were transferred to TAQA. They cashed in, took the profit and used the money on a different project of theirs. There was no fear that Tesla wouldn't make it - just business.
      Grendal
      • 2 Years Ago
      oktrader. This is not some crazy accident that 2-3 cars are coming off the line. The "terrible situation" you describe was always part of Tesla's plan. It's also part of every manufacturer's plan. It's a ramp up. No one has said they aren't going to hit their goal of 5000 by the end of the year. In fact, #2500 of the General Production cars has been contacted by Tesla to sign their contract for their car. They were given a possible delivery date of late November to early December. Tesla is doing some final tweaking of the car that has slowed the ramp up. They were ahead of schedule and now they are more even with their original schedule. Any more delays and they will need to scramble toward the end of the year but that still would not mean they won't hit their 5000 mark. The question is how much profit will be made, not whether they can produce the car at production speed.
      DaveMart
      • 2 Years Ago
      @Nick: Doubling down on the red is not always a good idea, and I think Musk is not only too smart to do that, but his statement gives a pretty good indication that he is not going to try. Either their business plan and production costs work, or they don't. It is only governments that keep throwing money at idea which are not working. Tesla still have a good chance, but it is no more than that, and many hundreds of million more dollars just are not available, and might not do much good if they were.
      Marcopolo
      • 2 Years Ago
      krisztiant, Ok trader and Grendal, Ok trader's accurate analysis provides excellent insight into Tesla's financial position. Tesla may simply be undergoing initial manufacturing teething problems. If these can be expediently resolved, allowing Tesla to commence filling orders and significant cash flow, this would help restore market confidence. I believe Elon Musk and his team possess the necessary manufacturing knowledge to successfully produce 5000 vehicles. But as the numbers grow, more and more contingencies will arise, and Tesla's inexperience will start to show. I don't believe that Tesla can afford to contemplate new models before establishing a solid market for the model S. There should no problem with sales of the top end variations of the S, but if the cheaper variations fail to sell, any dream of expansion will disappear. Elon Musk owns or controls about 34 % of Tesla. Tesla's first three rounds of capital raising prior to the IPO, consisted of such entities as, Google co-founders Sergey Brin & Larry Page, Hyatt heir Nick Pritzker , eBay President Jeff Skoll, Compass Technology Partners , Capricorn Management, SDL Ventures, Valor Equity Partners, QCG, Rainbow Orion, Technology Partners, Draper Fisher Jurvetson, and The Bay Area Equity Fund. Daimler AG, acquired nearly 10% of Tesla, subsequently mostly sold to Abu Dhabi's, Aabar Investments ! (Oil money !). The IPO attracted the same mixture of investors. Tesla shareholders have an unusually high proportion of investors who are motivated by more than just profit. This is Tesla's strength and weakness. Tesla's share price is irrationally overvalued. The company is most unlikely to survive on cash-flow alone. This will leave Musk with two options, raise more capitol, or effect a merger with a larger OEM ! Personally, I would imagine a merger would be preferable to Musk. Musk may be able to raise tens of millions, but Tesla needs hundreds of millions, even billions to survive !
        oktrader
        • 2 Years Ago
        @Marcopolo
        Thanks for the endorsement, Marco. It pains me to diaree a bit after the kind words, but here goes... Your faith in altruistic investors greatly exceeds mine. Remember that most of the VC and IPO investors made serious money with the initial issuance of TSLA. Regardless of all the earnest cocktail conversations in which participants competed over who could better express Concern For The Planet, they saw the opportunity to MAKE MONEY. But the conversation has changed. (1) The ATVM Loan agreement was signed in Janary 2010. The IPO was in June. Forget the myth that "the loan wasn't needed". Fact: the Loan was key to structuring a deal that would support the Offering. Almost half a $B of cheap money was available to be applied to the Tesla promise with very favorable rates and few constraints. Now it's all gone, and there is no parallel to this pile o' cash today. (2) Speaking of "the promise of Tesla": they promised a LOT. Musk has had a great story to tell at every major funding juncture. In 2009: Roadster will reach 30 cars per week in 2010. Shortly thereafter: S Model deliveries to customers beginning in 2011. At the raise for the X Model: X production beginning in 2013. It goes on. At some point he jumped the shark (I think it happened with the X "reveal" and the brief flash of "record" deposits). The Musk magic is fading and he will need to be far more concrete with numbers scrutinized to more tan one significant digit. (3) Early investors see possibilities, like new lovers looking across a candle-lit table. Saviors see reality, as marriage partners see every new wrinkle and dirty socks on the floor (AGAIN!). Musk is nothing if not bright. He knew he needed money at least a month ago. While it is pure speculation, I believe he has been seeking backing, and the change in Tesla's curcumstances over the past three years have changed the reception he has gotten when he knocks on the door. If he could have gotten friendly help, he would already have it. BTW: TAQA, the Abu Dhabi sovereign fund you referenced, has divested all of their TSLA shares (77% profit).
        oktrader
        • 2 Years Ago
        @Marcopolo
        Obviously that was supposed to be "disagree"
      Letstakeawalk
      • 2 Years Ago
      If you are a Tesla fan, and you don't donate to this worthy cause, then Elon Musk will personally put your name on a "Do Not Sell to this Jerk" list. DONATE! http://theoatmeal.com/blog/tesla_museum (claims made in this post may not be valid - still, you should consider donating, because it will piss off the ghost of Edison, and we all know what a jerk he is)
        • 2 Years Ago
        @Letstakeawalk
        Forget Edison! More importantly, it will piss of the ghost of Nikola Tesla!
          • 2 Years Ago
          Ignore my last post; I misread yours haha!
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