Musk wrote that the money "actually only gives us approximately 10 months at the first-quarter burn rate to achieve breakeven." We expect to fund our activity out of our growing cash flow" as a "buffer" to a possible recession or automobile industry downturn.īut he revealed a different use for that cash - day-to-day expenses - in a cost-cutting memo to employees on Thursday that prompted the stock-price smack-down. On the May 3 call about that stock-and-bond deal, Musk told investors, "We don't expect to spend this capital. While cash on hand fell to $US2.2 billion at the end of the quarter, what many analysts saw as a dangerously low level, Musk raised some more. Tesla announced it is cutting the prices of its two most expensive models, the Model S and the Model X SUV. At a time when the company should have been ramping toward the "exponential growth" long promised by Musk, automobile revenue was down 41 per cent, leading to a $US702-million net loss and $US640-million negative operating cash flow. The grim situation was laid bare in March, when Tesla turned in a disastrous first quarter.
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The Tesla story has shifted from "glass half full to glass half empty." Patience, he said, "is wearing thin." "Demand has been extremely disappointing this year," Ives said. No more.Īlthough Ives said he does not believe Tesla is on the brink of bankruptcy, he said the company is headed toward a cash crisis without another capital raise, even after the $US2 billion it raised from stock and convertible bonds sold earlier this month. In the past such products, like the Tesla semi, while derided by critics as vehicular vaporware, have managed to boost the stock price.
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Musk has responded on two tracks: He's watching every penny of expense, while talking up a series of projects with varying degrees of likely completion - from a new Model Y crossover to a robo-taxi service he employed to pitch the recent stock and bond sale. Tesla's financial condition has only deteriorated since then.
That came after 9 per cent were laid off the previous June, with Musk saying, "We are making this hard decision now so we never have to do this again." After two profitable quarters in late 2018, it seemed the time had come for Musk to buckle down and make good on his promise to deliver a mass-market car efficiently and profitably.
"There are dark clouds forming over Fremont," Ives said in an interview, referring to the site of Tesla's car factory in California.Ī storm was already brewing in January, when Musk announced that 2,500 workers, 7 per cent of the workforce, would be laid off.
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