Tesla Is Losing A Shocking $4,000 On Every Car It Produces


Tesla Is Losing A Shocking $4,000 On Every Car It Produces

Tesla’s Elon Musk may need to come up with a new business model for the company as it was revealed over the weekend the electric carmaker loses a whopping $4,000 on every Model S sedan is sells. The company’s losses totaled $359 million last quarter as the company prepares its transition to the mass production of multiple models next year. While Musk promises that the company will be making sufficient profits by then fresh doubts have emerged over just how financially viable the company really is.

The bad news was reflected in the company’s stock price Friday, which fell 2% following a 9% drop on Thursday. With the huge losses Tesla’s cash on hand has dropped from $2.67 billion last year to $1.15 billion on June 30.

That means the company is operating on the knife’s edge as typical costs associated with bringing a new car to market can reach over $1 billion. Rival carmaker GM has $28 billion cash on hand and sells over 9 million vehicles a year. Tesla plans to produce less than 55,000 for 2015. The company is eyeing 500,000 vehicles per year by 2020, following the release of its Model X SUV this year, and its lower-cost Model 3 in 2017.

Yet Tesla has always courted controversy with its big ambitions and shaky financials. The company’s stock price is 70% higher than it was two years ago and its market cap of $31 billion is currently greater than Fiat Chrysler’s $21 billion.

The strong performance amid obvious doubts is a testament to Musk’s amazing marketing ability. Pre-orders for the company’s new Powerwall are filled through 2016, despite the economics of the system making no sense. Musk’s unique combination of engineering credibility and salesmanship continue to lengthen the runway for Tesla despite clear economic concerns for the startup carmaker.

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