IT’S TIME FOR TESLA TO SINK OR SWIM

December 8, 2021

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Tesla is at risk of going out of business. This electric car pioneer has raised new capital every year since its 2010 IPO, and they’re still posting massive losses. No matter how good their cars are, every company needs to turn a profit.

How bad are things at Tesla? They make innovative cars that people want to drive, and they’ve been limited largely by how quickly they can build and ship new vehicles. That sounds like a good problem to have, and yet Tesla burned through $700 million dollars in the last quarter alone. Their losses since IPO are in the ballpark of $10 billion.

Things are only getting harder. Federal tax credits for electric cars are phasing out now, and that’s cutting into demand.

All those Tesla losses have occurred with the government offering a subsidy of thousands of dollars per vehicle. Worse, rival car companies around the world are getting into the electric game, and competition is rising. Tesla faces the double whammy of losing their subsidies at the same time that they’re no longer the only game in town.

The very thing that Tesla has struggled with so much — efficient manufacturing and distribution at scale — is also what more established car companies are great at. It takes time to figure this stuff out, but time is running out, and Tesla is going to have to sink or swim.

Wall Street hasn’t given up on Tesla yet — their market capitalization is similar to Ford’s, even though Ford’s production is an order of magnitude greater, and Ford is actually profitable. Musk’s reputation as a visionary is clearly worth a lot, and Tesla cars still have that sizzle.

I count myself among the many people who are rooting for them to succeed. Musk is an innovator and risk taker of the first order. I admire his drive and his guts. But great ideas, marketing, and lofty visions of the future aren’t enough. It’s time for the rubber to meet the road, and for Tesla to prove that they’re viable.

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