No week goes by without yet another headline that talks about the immediate demise of the Californian electric vehicle pioneer Tesla. Since the founding of the company and especially since the charismatic Paypal cofounder Elon Musk took charge of Tesla, those news won’t stop. Sixteen years after the founding of the company, Tesla is still around, and has upended the automotive industry. With the Roadster, the Model S, the Model X, and now the first mass vehicle, the Model 3, Tesla not only demonstrated that good and affordable electric cars are possible, but that customers want them and buy them. And the upcoming vehicles, such as the new Roadster, the Model Y, or the semi truck, are changing more and more categories of the automotive industry.
With those successes Tesla forced almost single-handedly the entire automotive industry to think differently and develop their own electric vehicles. And I am not even mentioning the Autopilot, the over-the-air-update capabilities, and a lot of other details, which were considered unimportant or outright impossible by experts. With all those changes traditional manufacturers have to rethink, make massive investments in new technologies, and consider how to deal with employees and expertise from obsolete areas. If we just look at the facts we can see hundreds of thousands of jobs being eliminated in the next years.
It’s no surprise that traditional automakers are getting nervous and want this nightmare Tesla disappear rather sooner than late. Whenever I meet delegations from Europe in Silicon Valley, consisting of automotive experts and politicians with a large automotive industry in their states, I always hear this sentence:
“Tesla will soon be bankrupt anyways!”
But that looks a lot like wishful thinking. Tesla hasn’t gone bankrupt and seems to be able to raise money without many problems.
Elon Musk has invested in Tesla in 2004, and since then managed to save Tesla from filing for bankruptcy, and that several times. The moment in 2008, the year of the financial crisis, where he save the company in the last minute on Christmas Eve, is one of those tales that Musk talked about some time ago.
Also in 2013, when the launch of the Model S was imminent, Tesla was already financially strapped so much, that Elon was searching for buyers. And the Google-founders, with whom Musk has a close relationship and stays with them on a regular base when in Silicon Valley, had already the acquisition contract ready to be signed. This contract is rumored to have included Musk staying Tesla CEO for another 8 years until the rollout of the first mass market electric vehicle, the Model 3. At the same time, apparently, Apple as well was interested and made Tesla an offer.
When Musk toyed with the idea of taking Tesla private in early 2018, within a few days Volkswagen offered 30 billion dollars. Even though Musk stated last year that Tesla won’t need to raise more capital, the losses in Q1 2019 required it anyways and made him change opinion. The targeted 2 billion dollars turned out to be 2.7 billion.
If we tally up Tesla’s losses over the years, then we see that the company burned through 4.828 billion dollars (Source: Forbes & quarterly reports) , while raising 21 billion dollars over all those years. Those values are not just burned and lost, but are available in form of three Gigafactories, the Tesla factory in Fremont, the global supercharger network, and among others the enormous brand value.
Those 4.8 billion dollar may sound like a lot – and they are – but let’s put that in relation to the penalties and fines that Volkswagen had to pay so far for the Diesel cheating scandal: 29 billion dollars! And that without counting the loss in brand value. With those fines alone they could have paid six times Tesla’s losses – and would have made an economical much sounder decision for the benefit of humankind.
If we read through the latest news, we get the impression, Tesla again is close to bankruptcy. But all those years have shown one thing: there is so much interest in that company, that whatever is happening, Tesla will stay. Maybe not as an independent company, or without Elon Musk, but this nightmare Tesla will not go away. Trying to convince oneself that Tesla will be gone soon, and that such crazy things like electric vehicles or autonomous driving will finally be put to rest, and that the automotive industry can go back to “normal” and “proven” technology, won’t happen. Tesla has changed the equations and the expectations forever.
Tesla will also be here in the next decade and be leading the pack, and the automotive industry should better sooner than later understand that. Only then they will take this threat for real and increase their own efforts.
This article was also published in German.