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Tesla releases semi prices amid a cash-poor situation

Posted: November 27, 2017 by Elizabeth Bate

PALO ALTO, CA – In the time it’ll take you to read this article, Tesla will have burned through more than US$24,000.

The electric vehicle manufacturer released price points for its first three fully-electric Class 8 truck models, due to hit the streets in 2019, but industry watchers are also expressing concern over the manufacturer’s spending speed and lack of liquidity.

 Bloomberg reported last week that the company is spending US$8,000 a minute, or nearly a half-million dollars an hour. At that spending rate Tesla will run out of cash in the early morning hours (eastern standard time) of Aug. 6, 2018, according to Bloomberg‘s math.

Tesla’s CEO Elon Musk said last week the company would attempt to raise more money by taking large deposits, up to and including the full cost of the vehicle, from those customers wanting to pre-order models that have yet to hit the road.

While three companies operating in Canada have said they’re placing pre-orders for the new fully-electric semi, Loblaw said it put down just $5,000 each on 25 trucks, while Musk’s company now says it will be asking for US$20,000 as a deposit for one of the Class 8s.

The trucks will come in three models, with the base model (480km range) priced at US$150,000, and the long-range (800km) truck priced at US$180,000. The Founder Series model will be priced at US$200,000, with the whole thing due up front.

The cost for the truck is higher than the estimated at US$100,000 by Morgan Stanley analyst Adam Jonas in a widely-circulated memo back in September. The higher-than-estimated price points have some analysts, including those at Mashable suffering from sticker shock, but Musk says the trucks will come with a quick return on investment (ROI).

At the unveil of the trucks Musk said the trucks would save owners 20% off the cost of traditional models from the first mile – putting ownership at a cost of US$1.26 per mile compared with US$1.51 per mile.

The cost of the trucks may also be justified by advanced technology features that include more than just batteries. Assisted breaking technologies, safety features, and a streamlined cab are just a few of the things on offer.

While pre-orders for the trucks are available on Telsa’s website, the company is still experiencing manufacturing difficulties with its Model 3 car, which has been pushed back to March 2018 when 5,000 units per week are expected to roll off the line.

The production problems and lack of delivery on original deadlines means the company is currently spending more than it’s taking in. Even with a stock price that pegs Tesla’s value at about US$53 billion, it will need an infusion of cash if it’s going to continue to be viable.

Spending more than US$1 billion per quarter because of investments into the Model 3 – which has a US$35,000 out-the-door price tag for its base model – the company will need more investors soon, without which Bloomberg analysts predict the company may collapse inside of a year

Kevin Tynan, senior analyst with Bloomberg Intelligence, told Bloomberg Markets that he estimates Tesla will need US$2 billion in new money by mid-2018 if they are going to keep their doors open.

Tesla meanwhile says it has enough cash to get it through until the Model 3’s start rolling off the line, and after that it says will see returns from its operational activities, although a Nov. 1 note to investors remained vague on plans.

The company is reportedly using its revolving credit resources at a high rate, with 70% of its debts outstanding in September – more than double that of the same month in 2016 – while bonds sold three months ago to cover US$1.8 billion in debts are still not worth what investors paid for them.

While shareholders appear to be remaining enthusiastic, with stock prices stable since the rollout of the new semis more than a week ago, analysts are becoming skeptical about Tesla’s ability to hang on to even see the predicted production date of the trucks.

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