7 Comments

Summary:

The risk for Tesla isn’t its balance sheet. It’s that it’s a one product company and were it to have a supplier problem or recall, its could get caught in a cash crunch very quickly, says GigaOM Pro analyst Adam Lesser.

Tesla Model S

In an article responding to this MarketWatch story, GigaOM Pro cleantech analyst Adam Lesser argues that Tesla’s Model S sales and momentum could reasonably make it profitable in 2013, and the company isn’t likely to be as strapped for cash as MarketWatch columnist John Shinal claims.

MarketWatch’s Shinal says that Tesla:

”will rank among the top candidates in Silicon Valley for a 2013 stock collapse, unless it receives significantly more cash next year.”

But Lesser notes:

“the company is supply constrained right now, not demand constrained. It can’t build enough cars. People like the product.”

And Lesser adds:

“the risk for Tesla isn’t its balance sheet. The risk is that it’s a one product company and were it to have a supplier problem or a recall, its margin of error is so small that it would get caught in a cash crunch very quickly.”

It’ll be interesting to see Tesla transition from a one car maker to a company with a portfolio of cars by the end of next year and into 2014. To read Adam’s entire article check out GigaOM Pro (this one’s free).

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  1. For years, Porsche was a one-product car company. There are lots of tech companies (and Tesla is a tech company as much as it is a car company) that have only one product when they are formed.

    While Apple isn’t a one-product company, their shares would be hit if they had a supply problem for the iphone. So what? What company’s share price wouldn’t be affected by supply issues for a key product?

    IS the goal of the analyst’s comments just to have something negative to say? They should read the disclosures by EVERY tech company that say they could be in serious trouble for any number of reasons.

    And for the record, people don’t like the product. They love it.

  2. People having been doubting Tesla for years but it just keeps attracting more and more customers, and it has demonstrated an amazing ability to overcome problems, one after another.

  3. “The risk for Tesla isn’t its balance sheet….its margin of error is so small that it would get caught in a cash crunch very quickly”

    So in other words,, the risk is, in fact, the very balance sheet that isn’t the risk?

    A cash crunch is a balance-sheet problem. The reasons why are, quite frankly, pointless. The idea that having Model S and Model X would make this a “2 product company” wouldn’t in any way solve the problem of a recall on S causing a cash crunch — if the recall were big enough.

    Hell, having, S, X, and “Bluestar” Sedan, Crossover and Roadster 2 won’t either. By then, there’ll be 60,000+ Model S cars on the road and another several hundred million sunk into development. A big enough recall is still going to be a “cash crunch” if it happens.

    All of this is balance sheet stuff, nothing more. It’s the risk of any fledgling company, espeically one that is so capital intensive.

    It’s probably 5 years or another billion in access to capital before that risk is completely gone. But let’s be clear: They’d need the money in the bank before this hypothetical recall.

    I’m sure most of us are with Tesla here in hoping no such thing happens.

  4. The customer demand is there. At this point, it’s all about execution. As Elon said in an interview, this is not a software product and it can’t be close…it has to be a complete product going out the door. With software, you can have iterations but not in the car biz. Exciting, but a good deal of risk with this company still.

  5. I find it odd that Tesla IPO’ed when they did but Elon knows the value of perceived value and he plays it like a fiddle. Even if every analyst is spelling death for Tesla, if they keep quality products rolling, it doesn’t matter what analysts say. Car of the year isn’t some toy in a cereal box; it says a lot more about Tesla than a reporter looking for ad revenue.

  6. Caesar James Yong Tuesday, January 1, 2013

    tesla invented free energy!! so??

  7. Who are these losers? Right out of “Business School” with no real experience…
    I was there when MarketWatch went public via it’s spinoff from Data Broadcasting, and when i see a series of ignorant comment like what John Shinal has just said, well, it reveals his naivete. You have to see the depth and 3-dimensionality of Elon Musk’s business plan. The problem with novices like Shinal is that they don’t have that visionary depth that it takes to see past the hurdles. Case in point. Musk’s choice of the name Tesla is key. My degree is in the Electro-magnetic spectrum, and 30 years later, I own two very successful companies. At the very heart of what Musk is doing is “building a better mousetrap”. The architecture of an ICE (Internal Compustion Engine) is so deeply ingrained in the minds of business analysts that they fail to see the obvious. A “redesigining” of traditional business Models can “bend” the analysis tools used for traditional business models. When you introduce enough innovation to the model, you cut corners in new and novel ways. I predict that within 2-3 years Tesla will announce to its customers the opportunity to “retro-fit” their cars at a modest cost. To do what? To receive AC Power over the EMS, rather than in the ways that gas pumps work. The concept of Wireless Power Transmission (WPT) has been around for more than a century since Nikolai Tesla carried out his first experiment using 150 kHz radio wave at Colorado Springs, Colorado, in 1899. Read this paper and pay attention…because there is going to be a test> http://ntrs.nasa.gov/archive/nasa/casi.ntrs.nasa.gov/20090012246_2009012319.pdf .
    Musk’s Supercharging stations will take the reduced cost power from his other company Solar City to then store that power in these Supercharging sites, and then transmit it to properly tuned receivers…inside of his cars. He is thinking three dimensionally, and has infact built 3 companies to interweave Tesla’s original model. Cars that do not require Gas, cars that do not require to be traditionally “filled up”, and therefore subject to the control of the gas companies will cause a paradigm shift that is long overdue. He took control of the NUMMI factory for pennies on the dollar, obtained Government Funding, and now has contracts. Nuff Said. Figure the rest out.

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