Why do people keep spouting this nonsense that Tesla is losing money on EVERY car? They make money on every car otherwise they wouldn't be selling any cars. The lose money due to their high R&D.
tldr: Because if Tesla did their accounting the way Toyota does, they have a negative gross margin.
Why are you so dismissive of walmart?
Total Revenue: 4,046,024 Cost of Revenue: 3,122,521 Gross Profit: 923,503
R&D: 717,900 Selling, General, & Administrative: 922,232 Total OpEx: 1,640,132
Loss from Operations: (716,629) /* snip some other line items */
Net Loss: 888,663
http://secfilings.nasdaq.com/filingFrameset.asp?FilingID=111...
So it's not all just R&D. Their revenue and cost of revenue includes their resale value guarantee and lease programs. I'm not enough of an accountant to know which way these tilt the numbers. Their resale value guarantee probably will help them maintain a high sticker price.
They would do this strategically to build their brand, market share, to work on inefficiencies in their pipelines expecting to make it up further down the road.
Except products sold at a lost are almost always loss leaders designed to increase other revenue sources. It is fine to sell razors, printers, or game consoles at a loss if products like blades, ink, and games sell for a large premium. The problem is that Tesla doesn't have any other products to offer. They sell cars. You can't really expect to function in the medium to long term as a business if your only product sells for a loss.
Also, Tesla is still building the world's largest battery factory. "Reinvesting revenue into capital improvements" seems to parallel Amazon's early-2000s growth fairly well.
If your unit cost is $50 and your unit revenue is $100, your unit profit is $50. If you sell 100,000 units, your business revenue is is $10M. If you spend $10M on R&D (and other overhead), your business costs are $15M and your business profit is -$5M.
BUT, if you sell 1M units, your revenue is $100M, your costs are $60M ($50M unit + $10M R&D), and your profit is $40M.
That's the power of scale.
(Compare this to a business with a negative unit profit: it won't scale no matter what you do.)
$100M revenue - ($35M + $10M) ==> $55M profit.
Tesla would lose money per car if, for example, the raw materials cost more money than they were selling it for (this is not the case)
Fiscal 2015 -
Research & Development: $717 million
Net loss: $888 million
First quarter 2016 -
R&D: $182 million
Net loss: $282 million
If their R&D was $0, they'd still be losing lots of money.
Actually they would be losing money even if the R&D line was zero.
If we assume the business is structured like most manufacturing businesses your capex, R&D, etc don't increase linearly with cars manufactured.
That means at some point Tesla will cross that threshold where the profit on each car is enough to cover those expenses and thus the company becomes "profitable" even on paper.
There is no scenario (known at the moment) where Tesla selling more cars would lead to increased medium or long term losses.
I'm a Tesla investor (from IPO) and I understand this. I knew when I bought the shares that they'd have to raise money several more times. Making cars is a capital intensive business and they've done an excellent job by making premium sporty electric vehicles to demonstrate that electric doesn't mean crap range or crap performance. Everything else is just scaling to get costs down and unit volume up.
People were also crapping on Instacart for saying they were unit-profitable in many cities but that's a good sign. It means we can see a goal line in the future made of dollar bills because the business is scaling up sales faster than expenses and eventually the two lines cross. It's also how Amazon ran their business for a decade and that seems to have worked out well for them.
Scaling up manufacturing is harder than building a low volume, expensive car.
- gross profit was $252mn
- operating expenses were $182mn in R&D and $318mn in SG&A
Even if you remove completely the "research and development" expense, the gross profit is not enough currently to cover the "selling, general and administrative" expense.
[1] http://ir.teslamotors.com/secfiling.cfm?filingID=1564590-16-...