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Tesla Is in Big, Big Trouble

March 27, 2018 00:00 AM UTC
- Updated September 02, 2020 11:39 AM UTC

It’s in “production hell,” according to Elon Musk

Transcript
[MUSIC PLAYING] Hello, and welcome to Fortune Tech Debate, the show where we discuss the issues of the day in two minutes. Today we're talking about Tesla, whose stock has taken a beating in recent days. Andrew, what do you think? Can it recover? I mean, look, much ado about nothing. I mean, yes-- Nothing? I agree with you. Yes, the stock is way down. I think Tesla's market cap is lower than Ford now. It's just something crazy. But Ford hasn't been doing so well either. Look, Tesla is executing-- it's executing poorly. But at the same time, I think it's still going to do the right thing, which is roll out a mass market car, the Model 3, and make every driver in the world happy. That's what I think. But the problem is it hasn't really been able to do that. It's still below production targets. It's in what Elon Musk has described as production hell. And it's losing money. It lost $2 billion last year. It's slated to lose $3 billion this year. Yeah, yeah, but it's also not a software company. This is a car company. And as much as we'd like to talk about it as a tech company-- and it is in some regards-- it's still a car company in so far that it has huge capital expenditures, OK? This is the time when it's burning through cash. It's burning, burning, burning, trying to-- It's been losing money for 14 years. Well, yeah, but it's getting better and better at making money. And that's what's important here. So yeah, they're burning a ton of cash, trying to get this model out the door. But once the sales start rolling in, then it'll be great. But they have to start happening. But here's the thing. What if the sales don't start rolling in? It's bet really big on this self-driving technology, but it had a fatal crash in 2016, which now investigators are looking into. And that whole model is being questioned now that Uber also had a fatal crash. I don't know. Now I mean, I agree that's actually an interesting issue. But I don't think that's going to put a dent in Tesla's sales at all-- at all. I mean, the Model 3 is the Tesla for the masses, meaning everybody can actually afford it. And we forget about international markets. I mean, they're putting something like one-seventh of all their revenue they're getting out of China. That's going to be a huge market for them. And I just don't think this is a big concern. But do you think that investors are really going to be patient enough? They're losing billions of dollars a year, and other people are catching up. It used to be only Tesla, but now plenty of car companies are also doing kind of what it does. Well, for sure, and I don't think they're going to be patient, but Elon Musk is the most well regarded entrepreneur in business. And I think he'll figure out a way to get the money. Unfortunately, that is all the time we have. Tune in next time to fortune.com for more Tech Debate. [MUSIC PLAYING]