Elon Musk was full of praise for Tesla at the launch event of the Model Y last week, starting off with a (not very new) perspective of where Tesla and electric cars stood 10-11 years ago when Tesla built their first car, as compared to today. At the time the world was obviously in the midst of the financial crisis, when some rather large car makers in the US went bankrupt and had to be rescued. Given Tesla’s Q4 -18 and 2018 full year numbers are known, I believe it’s justified to have a closer look at to what extent Tesla in 2019 is comparable to some of those companies in 2008. Unfortunately, this is not that far-fetched if you listen less to Elon and look more at hard numbers.
Tesla had current assets of USD 8.3bn at the end of 2018, of which USD 3.8bn in cash. With liabilities at 10bn, the working capital ratio is a negative -1.7bn. The current ratio, i.e. assets over liabilities, comes out at 0.84, and the so called quick ratio, i.e. cash over liabilities, at 0.46. However in Q1 -19, Tesla made a 0.9bn bond payment, thereby bringing the two above ratios to 0.74 and 0.39 respectively. This is where it gets interesting to look at a company like General Motors during the financial crisis, when at the time of bankruptcy the two ratios stood at 0.6 and 0.3. As a further comparison, today the average for the car industry is at 1.36 and 1.2. An established company such as BMW comes in at 1.18 and 0.96, a “new” car brand such as Chinese Geely, at 1.09 and 0.94. There are thus many billions between the car industry at large and Tesla’s current numbers.
It’s also important to remember that a part of Tesla’s cash position is for cars not yet delivered (down payments etc.), and thus not cash in the proper sense. Finally, car sales are still the only meaningful income for the company, with energy sales making up only around 0.3bn per quarter.
Tesla is currently cutting costs by closing its re-sellers and moving to online sales, but savings achieved there will mainly go to reduce prices in the US, where state subsidies to electric cars are about to end. So when Elon announces the launch of the Model Y (and if you want to move directly to the actual showing of the model Y, you can skip a lot of bla-bla to around 27.30 minutes in to the video), completing the slightly imperfect S-E(3)-X-Y range, one can’t help but wonder where the development money will come from. Or will Tesla’s model range effectively end with the slightly less subtle S-E(3)-X?