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Apple, Tesla Fighting Over Top Employees
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From what I've read, Tesla plans to offer a "Model 3" for a starting price of 35k. With common options (tech package, interior upgrades, panoramic roof, and more), I think 40-45k is probably going to reflect the selling price around the median.
Tesla probably would post a profit if they weren't reinvesting their earnings into the business. Their gross margins are in the 25-29% range. While that's not Apple-level margins, that's pretty good for a car company.
Making profits today is not a smart idea if it means messing up the company's long term goals. Tesla wants to sell hundreds of thousands of cars/year. They need to reinvest today's earnings in factories, R&D, and service centers if that is to become a reality. Strategic plans are more important than quarterly earnings IMO, and even more so for a growth company.
This is myopic by Apple - there's great talent all over the world that they can spend their cash hoard on for a lot less. Time to stop being so parochial when it comes to development, Apple.
Actually you can google all of my info easily. Google ALSO was founded by people with no money, not TESLA.
Tesla is selling thousands of cars, not millions, and getting the highest tax credits of any car manufacturer. The $7000 tax credit in the US is widely known. The California Green Energy credit is also widely known, but most people didn't know Tesla could sell the credits for profit to the other carmakers, both home and abroad for profits. So the the only way they're leading is in profits per vehicle! HAHA!
If you haven't noticed, pretty much every other ELECTRIC ONLY car manufacturer has gone under in the US.. Sure they're a success story, but you should know that.
YOU AND US ALL PAID FOR IT WHETHER YOU OWN ONE OR NOT!
Since you didn't dispute any of the above facts with any facts but to sidestep to other industries, I'll assume you just disagree so strongly for "environmental" reasons. I don't know what the tax credits are in Europe, but it's widely known in the US.
It still won't drive 350 miles to visit my aging mother and believe it or not, there aren't even any places just 300 miles from Washington DC itself, which is partially funding this startup, where you can even charge it! And that's a FACT! I know. I live here!
In that neighborhood. We've been hearing the target as under $40k but it's still years off, so even Tesla probably doesn't know yet. The point is they are going to have company in that price bracket when the time comes. It will be interesting to see what sorts of compromises Tesla has to make to bring the car in for that kind of money.
This is the same argument used to defend Amazon's lack of profitability. Driving the top line without producing earnings can go on for just so long. If a company doesn't post earnings then eventually they will run out of money. I believe it's six years of losses now for Tesla without a single profitable quarter. I couldn't say how much capital they have left to burn, but eventually continuing to burn it will become unsustainable.
The tax credits aren't specific to Tesla. Customers of Toyota, VW, and any other company could claim the same credits if those companies built similar cars to the Model S. Tesla happens to make a car that qualifies for the full credit.
In any case, your disdain for Tesla is misplaced. They are just a business playing by the rules set by Washington. Your problem should be with the U.S. Congress, not with Tesla. Bashing Tesla is like bashing a football team for following the rules set by the NFL.
The SEC filings are all public. Tesla's Form 10-Q for Q3 2014 (ending Sept. 30, 2014) shows the company has approximately 2.37 Billion USD in cash & cash equivalents, up from 845 million a year prior, and Total current assets are 3.36 Billion USD. Accounts payable are 649 million. Total current liabilities are 1.84 Billion
Total assets are 5.4 Billion USD, versus total liabilities of 4.4 Billion USD.
If you look at the cash flow, R&D alone is 135 million, close to 2x the net loss reported. Bottom line: the company has plenty of cash on hand, and that pile of cash has grown over the past year. Don't count on them running out of money anytime soon.
Without trying to untangle those numbers, I don't know how you grow cash on hand and lose money at the same time. They've never posted a profit, so the only other possibilities are a secondary public offering (which I don't think they've done), a hell of a lot of stock options being redeemed, or some other form of equity investment. Musk's own money? I don't know, but something doesn't add up.
Total assets isn't a very useful number BTW. Much of that will be illiquid.
It has something to do with the accounting methods, and whether one uses GAAP or non-GAAP rules. On a non-GAAP basis Tesla posted a 0.02 USD/share profit. On a GAAP basis they show a 0.60/share loss. Vaguely I remember seeing on the news that leasing and when revenue is recognized has an effect on the difference in numbers for all companies, not just Tesla.
I'm not an MBA, CPA, or a finance guy. Hopefully someone here can explain this.
Now that I agree with. It's Washington and California that have kept this car company afloat. Otherwise, they'd be bankrupt. Nobody turns down free money. The guy who owns Tesla was already a billionaire, so he clearly knows how to play the rules and I congratulate him.
BUT, comparing TESLA to APPLE is an INSULT to Apple & Google and lots of breakthrough tech companies, who had no government subsidies like this and started with nothing. This guy started as a BILLIONAIRE! LOL
Just think what Steve Jobs would think about a guy who started a company as a billionaire stealing his employees. I don't think you could print it here.
That was my original point, politics aside.
BUT, comparing TESLA to APPLE is an INSULT to Apple & Google and lots of breakthrough tech companies, who had no government subsidies like this and started with nothing. This guy started as a BILLIONAIRE! LOL
Just think what Steve Jobs would think about a guy who started a company as a billionaire stealing his employees. I don't think you could print it here.
Well, keep in mind that Apple and Google would be nowhere near where they are today without the Internet, which was created with Defense Department research dollars. Google arguably wouldn't even exist. I'll leave the politics there.
Tesla being started by Elon Musk is actually more of an urban legend than reality. Business Insider had a pretty extensive article on Tesla's messy history. What many people don't remember is that Tesla was really founded by Martin Eberhard and Marc Tarpenning, who I believe are Silicon Valley engineers. Eberhard is largely responsible for the creation of the Tesla Roadster. He's sort of the "Woz" in the whole story.
What Elon Musk did was invest much of the $165 million (he wasn't close to being a billionaire at that point) he made from the sale of PayPal to eBay into Tesla. From this investment, Musk got on Tesla's board of directors. He also obtained more private funding for the company and got more business allies on Tesla's board. With a board seat and influence over most of the directors, Musk was able to oust Eberhard from Tesla. Musk claimed that Eberhard had badly mismanaged the company, while Eberhard blamed Musk for constantly making demands for changes to the Tesla Roadster design. Today, comparatively few people know about Martin Eberhard's important role in founding Tesla.
I think Jobs would have hated employees being lured away, but I think he also would have admired Elon Musk's ruthlessness. Musk re-invested everything he earned from PayPay into SpaceX and Tesla (nearly bankrupting him by 2008), and it's not often that someone who hits it out of the park bets it all again on risky ventures. Both Tesla and SpaceX have made incredible progress over the past 5 years, and Elon Musk deserves a lot of credit for that.
Someday there will be books or movies about this, lol.
Tesla is vaporware? What the hell are you smoking? It's quite possibly the most successful electric car brand in the world, and on top of that, it's run by Elon Musk, a man so awesome that Tony stark was based OFF him.
Me either, but I semi-understand the difference between GAAP and non-GAAP earnings, at least to the extent that Apple switched between the two accounting methods a few years ago. It is now the required method of reporting earnings.
It's about how earnings are booked on products sales for which some percentage of the product revenue is deferred to account for upgrades or services offered to customers without charge over the life of the product. In Apple's case, going to GAAP earnings accounting caused reported earnings to shoot up because previously they had to spread iPhone revenues out over two years. With GAAP they now report most of their earnings at time of sale.
How this could work the opposite way for Tesla, I can't imagine. Well, I can imagine I suppose. If earnings from previous quarters with higher revenue could be spread out into future quarters with lower revenue using non-GAAP accounting deferral method, then perhaps this could result in a paper profit. I'm not sure how this changes the fundamental financial picture for Tesla, though.
Automobiles, and luxury cars in particular, are often leased, and Tesla does offer leases with high residual guarantees. As far as I know Apple doesn't lease phones.
A straightforward sale would be reported as revenue in full, while revenue from a lease would have to be spread out over several years.
Politics aside, I agree with everything you said.
But there's a false comparison between Tesla and Apple. MANY companies benefited by the government money to invest int he internet.
In this case, TESLA is one of the few that has succeeded at taking government directly, while all the others failed and took the money and ran with it delivering nothing. But I'm glad the guy succeeded. But people who bought an Apple computer did not get a tax subsidy for buying an Apple ][e last I checked.
Without all these subsidies, Tesla would have gone under unlike Apple.
In effect, Apple leased phones, by means of selling them through the providers on two-year contracts. At least that was the reason why they were required under the previous accounting rules to book the revenue from them over eight quarters. Under the GAAP rules they can now book most of the revenue at the time of sale.
http://fortune.com/2009/09/24/apples-2009-earnings-up-nearly-44-under-new-accounting-rules-analyst/
Apple, Tesla Fighting Over Top Employees
I looked some more into this. The iPhone revenue recognition over 8 quarters was required because GAAP rules stipulated that products with free upgrades (like iOS updates) had to be counted as "subscription revenue". This is different from leasing.
For automakers, they typically sell cars direct to a franchised independent dealership (a full sale) and a customer lease goes on the dealerships books as a lease. Tesla leases directly to customers and therefore must defer revenue on leased cars. The effect of this on quarterly GAAP cash flow would be to put all the cost of building and selling a car in the quarter where the car was made, but defer the revenue over several years of the lease. So hypothetically, if the cost of the car to Tesla was 50k, and the total quarterly payments only added up to recognized revenue of 4-5k, it would look pretty bad.
Edit: would really like a CPA to explain, because I do not know GAAP well.
I looked some more into this. The iPhone revenue recognition over 8 quarters was required because GAAP rules stipulated that products with free upgrades (like iOS updates) had to be counted as "subscription revenue". This is different from leasing.
For automakers, they typically sell cars direct to a franchised independent dealership (a full sale) and a customer lease goes on the dealerships books as a lease. Tesla leases directly to customers and therefore must defer revenue on leased cars. The effect of this on quarterly GAAP cash flow would be to put all the cost of building and selling a car in the quarter where the car was made, but defer the revenue over several years of the lease. So hypothetically, if the cost of the car to Tesla was 50k, and the total quarterly payments only added up to recognized revenue of 4-5k, it would look pretty bad.
Edit: would really like a CPA to explain, because I do not know GAAP well.
My god, I'm afraid to keep reading. Does nando87 EVER stop embarrassing himself in this topic?
I think the accusations against Tesla of "vaporware" would stop if the naysayers would take a few minutes to look at Tesla's strategic plan, which has been posted on their website for over 8 years now:
http://www.teslamotors.com/blog/secret-tesla-motors-master-plan-just-between-you-and-me
Summary:
Step 1 was accomplished with the Tesla Roadster. That provided money for Step 2, which is the currently selling Model S. Model X is kind of Step 2.5, a side project but one that should increase earnings since SUV margins are generally pretty high. The earnings from Step 2 are being put towards Step 3.
Tesla is working on Step 3, which is selling a car in the 35k price range. That is why they are building a huge battery plant in Nevada, and expanding production capacity in California.
Tesla is hardly "vaporware" as they've successfully brought 2 products to market and are making progress on their ultimate goal: selling hundreds of thousands of cars per year.
Partnership with Solar City is to provide people with a way to get solar installation at home with which to charge cars.
Returning profit to shareholders will likely not happen until Tesla has achieved its goal of becoming a mass market carmaker. People have likened Tesla to Amazon as far as not making profit, but Tesla has a defined goal that's fairly specific, whereas Amazon appears to me to want to keep expanding every which way without a certain goal.
I would buy an Apple car. I bet it would be a totally different thing. Like the revolution it did with the iPhone. Well.... Jobs is not around.