Elon Musk’s recent bankruptcy prank on April Fools’ day, might have been a step too far for the technology baron according to many. Considering that Tesla, one of the biggest brands under his visionary leadership, is literally staring down the barrel of bankruptcy as the company burns through 6,500 USD(Rs 4,33,160) every minute. Amidst struggles to put out what is now seeming to be an endless barrage of PR massacres like the recently crashed Tesla Model S, as well as Tesla falling far short of its own production targets for the mass-market Model 3 sedan. To top it all off Musk entered into a public dispute with federal safety regulators over the Model S’ roadworthiness. As a result of all these things Tesla’s once high-flying stock was downgraded by credit analysts, dropping 24 percent from its peak in September.
As of this moment, Tesla has three cars in manufacture that include the Model S, the Model 3 sedan and the Model X SUV—at its only auto assembly plant, located in Fremont, California. There are aggressive plans to add an electric semi truck, a new roadster sports car and crossover to the production lineup in the next few years. Musk’s vision for the future once called for extreme automation, but citing himself wrong Musk issued a public statement in 2018, saying that Human operators were still the order of the day, as too many robots had spoiled the broth. Back in 2010, Tesla had just 899 employees. Today, the company has nearly 40,000 workers.
A lot of Tesla’s capital burn can be attributed to Musk’s roots in engineering, which means he treats raising capital as one element that needs to be solved. This view was put forth in a Bloomberg report, which quotes Andrea James, one of Tesla’s former employees noting Musk’s dealings with Wall Street and investors. The result is apparent in the fact that Tesla at the end of 2017, had $3.4 billion in cash on hand and $9.4 billion in outstanding debt. At this current rate of burn without any more large investments incoming, Tesla could run out of money by the end of the year.
Let's not strike the death knell for Tesla yet, because in the gap between ‘could’ and ‘will’ there is Elon Musk and his inherent ability to monetize emotions. Remember that seemingly reasonable 1000 $ booking for the Tesla Model 3, or that pay-in-advance 3000$ “Full Self Driving” capability on the Model S that is yet to make it to reality? Well, those account for a staggering $854 million in customer deposits as of the end of 2017.
These customer deposits are essentially interest-free loans that Tesla has acquired. And therein lies Musk’s genius. His image and the hopes of a better world for everyone have fused with the brand, allowing him to take financial risks like no other CEO before him. Musk’s only saving grace in the eyes of the investor is the fact that a large part of Tesla’s funding is from Musk’s own bank account. While Musk is all in, the question is how quickly will other vehicle manufacturers catch up to Tesla’s technology and can he stay ahead of the curve that he almost single-handedly began?
Inputs from: Bloomberg