A dramatic change of strategy was revealed today for US electric car-maker Tesla, as CEO Elon Musk did his best job of impersonating a regular CEO.
“First of all, I’d like to apologise for, um, you know, being impolite on the prior call,” Musk said on a conference call with Wall Street analysts this morning.
On the previous such conference call Musk had announced a $780 million loss, shouted down questions, called analysts names, and spent the majority of the schedule taking questions from an Tesla fan named Galilio Russell who runs a YouTube channel.
But there was little sign of the old Musk on Thursday morning (Australian time). Top Tesla shareholders had demanded the mercurial CEO to pull his head in, and he delivered. Well, mostly.
Announcing a fresh $730 million in losses, Musk was measured. Admittedly, his enunciation remained impenetrable and his tendency to ramble was firmly in place, and sure, he did bring Galileo Russel back and grant the YouTuber more time than he gave to the analyst from Morgan Stanley. But the anger was gone.
The market breathed a tremendous sigh of relief and Tesla’s stock price shot up almost 10 per cent in after-market trading, a huge gain.
Man on the brink
Traders had feared the worst. Musk in recent months fouled his reputation by making unsubstantiated claims a person was a pedophile. The target of Musk’s accusation was a British man involved in a high-profile rescue of boys from a cave in Thailand. He had criticised as impractical a submarine Elon Musk had made to help. Musk later apologised and deleted the tweets
That plus his so-called “meltdown” last time he faced Wall Street analysts had been adding to a growing concern Elon Musk had strayed beyond eccentricity and was getting out of control.
That concern was somewhat reduced on Wednesday. The CEO was, for around an hour, penitent and composed. He brought other executives onto the call and engaged politely with them. He behaved, in short, just like all the other CEOs of all the other companies. And that was a revelation.
Beneath the headline stories about the boss, however, the electric car manufacturer’s financials continued to look wobbly.
The numbers
If it succeeds, Tesla will be a huge boost to clean energy and contribute substantially to reducing the emissions from cars. But success is not assured.
Tesla cars are cool, fast and desirable – a claimed 60,000 people are lining up to test dive the Model 3. Tesla makes lots of revenue too — a whopping $4 billion came in during the last three months. The company’s Achilles heel however is cash.
Companies need cash to remain solvent. Tesla’s cash situation looks awfully tight.
Tesla has $2.2 billion in the bank, and $3 billion in bills that need to be paid soon (accounts payable). Unfortunately, $942 million (42%) of the $2.2b in the bank is customer deposits. Those deposits are refundable, although not held in escrow — Tesla is technically free to spend them.
“Are we running low on money?” Elon Musk asked during the conference call. “The answer is no.”
He insisted Tesla would soon pay off debts with internal cashflow. Such a thing will only be possible if the company dramatically reverses its enormous ongoing quarterly losses by making and selling its Model 3 car at both high margins and high volume. It is unclear as yet if that is possible.
At the same time, Musk said Tesla would take on more loans in China, to build a factory there.
“Our default plan would be to use, essentially, loans from local banks in China and fund a gigafactory in Shanghai with local debt.”
It is all going downhill
One of the most enjoyable parts of a Tesla phone call is hearing about the production problems a Silicon Valley company can face as it takes on the easily underestimated challenge of mass manufacturing.
In past calls we’ve heard plenty about mis-firing robots. This time, Tesla had to explain how it built a Model 3 production line in a tent.
Musk had promised Tesla would make 5000 Model 3s in a week by the end of June and he was determined to make it happen. Hastily Tesla put together an extra general assembly line in the tent, using old machines that were lying round.
“We had to come up with a creative solution,” said Musk. “Technically the conveyors…were not rated to move something as heavy as a car, so we made it downhill, on a one per cent downward grade… With Newton on your side you can accomplish a lot.”
The company ramped out 5000 cars in that last week of June, meeting its pledge.
Tesla is no doubt capable of problem solving other companies would never dream of. You can only imagine how far ahead it might get if that problem solving were focused on making the car better rather than extricating itself from traps of its own making.
Maybe the boy wonder is growing up and that’s a good thing. More public figures admitting mistakes and apologising with apparent contrition would also be a good thing even if money is the main motivator.
I think that declaring he’s learned to behave, is growing up, etc etc etc based on one call (for which he’d had ample time to prepare and be prepared by the company) is a bit rich. People can be rather gullible.
Musk isnt bonkers and it’s not exactly hard for him to do one civilized conference call if he has reason to make the effort. The test is how he reacts off the cuff the next time he feels provoked or ignored. I bet it’s still not pretty.
ANNNNND… yep, so much for Musk learning to behave.
Man this article went way too early.
Whether Musk is unpleasant is of less interest, to me, than the car.
Get that done and I don’t care what sort of an arsehole he likes to be.
“As this well-written article suggests, my words were spoken in anger after Mr. Unsworth said several untruths & suggested I engage in a sexual act with the mini-sub, which had been built as an act of kindness & according to specifications from the dive team leader.
Nonetheless, his actions against me do not justify my actions against him, and for that I apologize to Mr. Unsworth and to the companies I represent as leader. The fault is mine and mine alone.”
That’s a pretty sh*tt* apology from ol’ mate Elon. You’d think his apology was sincere the way it was covered by Crikey here.
Get the propulsion unit right an electric motor with comparable torque and range between recharge is sorely needed.
People can already drive for themselves, time to put the gimmick back in development.
You’d think to read this that Musk was the only person developing a serious electric vehicle. OK, he’s the most entertaining of them, the only one to have already dumped a jalopy in space and of course he’s a slanderous twat but there will be far more than Tesla available.