The $12.6 billion in pre-orders for the Tesla Model 3 on Mar. 31 demonstrates that Tesla Motors Inc. can produce incredible hype. But a day later, the company filed disclosure with the SEC admitting that it missed first quarter vehicle deliveries by almost 10 percent.
Breitbart News revealed Tuesday revealed that Tesla was in a working capital crisis in the first quarter of 2016, and likely used pre-orders to rescue its financial position. Tesla loses $19,810 on each car it sells, and hemorrhages $51,344 in negative cash flow on each vehicle at the start of the year.
Tesla’s annual report stated, “Sources of cash are predominately from our deliveries of vehicles, as well as customer deposits, sales of regulatory credits, proceeds from financing activities.” Tesla’s “biggest source of cash” has been those customer deposits.
Despite holding $283.4 million in customer deposits at year end, Tesla was technically cash-flow insolvent. The company’s working capital (= current assets – current liabilities) was a negative $24.7 million. Without those deposits, Tesla’s working capital deficit would have ballooned to a stunning negative $301.8 million.
About $156.5 million of Tesla’s $283.4 million in customer deposits were recently generated from the 31,300 Model X preorders the company booked during the vehicle’s star-studded-launch on September 29, 2015.
Tesla just admitted in its special SEC disclosure filing that despite promising to produce 16,000 vehicles, first quarter deliveries consisted of only 12,420 Model S and 2,400 Model X vehicles. With negative working capital, Tesla’s lack of cash may explain why the company’s production fell short by almost 10 percent.
But with 300,000 customers putting down $1,000 each for the privilege of waiting until at least the end of 2017 for the first Model 3 deliveries, Tesla generated $300 million in customer deposits to continue to fund operations.
Still, with negative cash flow running at about $121 million a quarter, Tesla will burn through its Model 3 cash and be insolvent again in the next 7 months. If the company speeds up production from 60,000 cars a year to 80,000, as promised, Tesla will burn through its Model 3 cash by the end of August.
Either way, Tesla will have burned through its Model 3 cash deposits at least a year before the first Model 3 is scheduled to roll off the assembly line.