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Comment by ccorda | Hacker News Reader

Last 4 quarters of free cash flow, seems quite sustainable:

  June 30, 2019 590.40M
  March 31, 2019 -944.80M
  Dec. 31, 2018 880.66M
  Sept. 30, 2018 831.52M

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This is what you want to be looking at:

https://www.macrotrends.net/stocks/charts/TSLA/tesla/net-inc...

Looking at it, it is revenue, gross profit and net income are all increasing by double digit percentage, every year. Still Tesla is spending a lot more, but less every year compare to the revenue. They are expanding quite quickly (new factory in China starting to produce this month), maybe too quickly ? It would be interesting to see during the next 6 months, how the production in China affects Tesla results.

Ask yourself: how much does a $5 Billion factory affect net-income.

Answer: a $5 Billion factory costs $0 in terms of profit. Its a capital-expenditure, affecting Cash Flow (not profits). Depreciation is how factories "wear out" in the income statement.

Tesla is not selling enough cars to make up for its $5 Billion investment in the Gigafactory. After many years, Tesla will only have made ~$4 Billion from a $5 Billion factory, by the time it has to replace all the equipment and pay $5 Billion again. (Made up numbers to roughly estimate what is going on here).

Tesla needs to make more cars out of the factory it has already built if they want to be able to rebuild the factory by the time all the parts wear out.

The Chinese Gigafactory cost $5B and should eventually produce 500,000 cars (less than 10,000 a week like its counterpart in US). If it takes 5 years to wear out, then Tesla would have to make ~$2k per car produced to pay the factory. I am curious to see how this Chinese factory would perform in the next 6 months. Clearly the plan has been to produce more per factory, and it did not happen yet. But I have faith in automation to eventually improve the factory's output.

> But I have faith in automation to eventually improve the factory's output.

Tesla's CapEx has been disappointingly low. Any kind of improved automation will require new equipment. Unless Tesla can scrape together more cash to improve their CapEx figures, its basically impossible for them to get "Better equipment".

IMO, Musk is spending too much money on unnecessary projects (ex: Cuphead ported to Tesla. Full-self driving custom designed chip. Etc. etc.) and not enough money on simple & boring stuff like better factory equipment.

Yes, I agree Tesla might have spent money on non essential (more video games), or at least non-trivial return (self driving custom designed chip). But Tesla did acquire Grohmann (automation), which is kind of boring stuff like better factory equipment. On a side note, I have been bullish on automation for a couple years, and it did not pan out, both Fanuc and KUKA had a rough past year... so no revolution on the automation/robot so far.

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