Five Reasons Why Tesla Will Never Make Money, According to Tesla
The SEC filing for Tesla Motors, Inc.’s public offering reads like a laundry list of how and why the company will never make money. Tesla announced Tuesday that it would publicly sell 10 million shares for $14 to $16 a piece on June 29. The “risk factors” section alone clocks in at 42 pages.
A Tesla Motors Model S is displayed in the Tesla showroom before a news conference at Tesla Motors headquarters May 20, 2010 in Palo Alto, California, Justin Sullivan / Getty Images
The SEC filing for Tesla Motors, Inc.’s public offering reads like a laundry list of how and why the company will never make money. Tesla announced Tuesday that it would publicly sell 10 million shares for $14 to $16 a piece on June 29. The "risk factors" section alone clocks in at 42 pages. Among the highlights:
- Although Tesla’s sporty, two-door $100,000 electric cars can accelerate to 60 miles per hour in 3.9 seconds, the company has only sold 1,063 of them. The much-anticipated, family-friendly sedan model will not even be in production until 2012.
- So far, the company has suffered net losses every quarter since it introduced its first electric car to the market in 2008. In the first three months of 2010, Tesla lost $29.5 million.
- Tesla is heavily dependent on government funding and with that money comes caveats. To secure a $465 million loan from the Department of Energy, Tesla agreed to spend $33 million developing its electric car sedan called a Model S—in addition to covering any cost overruns. Tesla also had to agree to put 50 percent of its net revenues from the sedan into funding manufacturing facilities and a power train model. In other words, any profits Tesla makes will have to go toward projects already spoken for.
- Its founder Elon Musk—a brand name internet entrepreneur and the brains behind PayPal—is both the public face of the company as well as its Achilles heel. Musk brings the glamour and connections to the venture—not to mention the gossip. (He’s divorcing a sci-fi novelist and living with a model! He has five kids! He’s a workaholic who’s running out of money!) But, he’s also enabled the money-losing company by pumping his own cash into the venture. Now that the owner’s personal bank account is starting to run low, the company is going public and will now try to generate revenue...?
- Finally, does anyone know if consumers will actually buy electric cars for six-figures? As the SEC filing says, even Tesla doesn't know the answer to that question yet.
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Nancy Cook is a staff writer for Newsweek and Newsweek.com, covering business and economics. In 2010, she and a team of two editors won the New York Press Club Award for Best Business Reporting on the Internet for their seven-month multimedia project called “Jobbed: How America Works Now,” which examined the future of work, careers and the labor market as the country emerged from the recession.
Cook has written about the way the stimulus money affected a single neighborhood to luxury retailers thrilled by record Wall Street bonuses to accounts of rank-and-file employees whose careers were turned upside down by Lehman Brothers’ collapse. She also has reported on politics and economic policy for Newsweek.com’s national affairs blog, focusing on the intersection between Washington D.C. and Wall Street.
Prior to coming to Newsweek, she worked as a producer on the 2008 presidential campaign at National Public Radio and as an on-air reporter for WRNI, the Rhode Island NPR affiliate. There, her enterprise and feature reporting on a lackluster urban school system and a federal lawsuit against the state child welfare agency earned her two regional Associated Press awards. She graduated from Carleton College and Columbia Graduate School of Journalism, where she now teaches as an adjunct professor.
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