Why is Tesla now burning $4-5 billion in cash every quarter? – Tesla Tesla electric car – cnBeta.COM

Currently, Tesla has one of the oldest product lineups in the industry (excluding the Cybertruck), consumer enthusiasm for electric vehicles is gradually cooling, and concerns about range and residual value have taken over, so some people think Tesla It’s time to return to the era of ruthless money burning.

One of Tesla’s biggest obstacles right now is Tesla’s aging product portfolio, which is squeezing out marginal demand in an industry where overall momentum is slowing. Take Xiaomi’s newly launched SU7 electric car as an example. Its popularity in China has greatly surpassed that of the Model 3.

As the Model 3 faces increasing competition in China and regulatory headwinds at home, battery procurement requirements make the electric car ineligible for the $7,500 tax credit, and many analysts now expect Tesla to Deliveries will once again see negative year-on-year growth.

This is the crux of the matter. According to analysis by X user Zero Sum Bond, Tesla is currently facing a sharp drop in demand for new cars, similar to what Detroit’s “Big Three” faced during the 2008 financial crisis, when new car sales plummeted. 18%.

Tesla’s annual deliveries were already down 9% in the first quarter of 2024, and there are signs that this sales-related malaise will only get worse. According to research from Zero Sum Bond, if Tesla’s deliveries fall to 2022 levels, the electric car giant could start burning through $4 billion to $5 billion in cash each quarter, especially during the special period. Tesla has slashed prices and reduced subsidies.

You know, Tesla’s recent stock price recovery is attributed to two factors: Robotaxi’s debut event in August and the possibility of promoting FSD throughout China. Regarding the former, Information magazine recently quoted former employees as saying that Robotaxi is “still a long way from launch.” In light of the ongoing problems with FSD, NHTSA has issued a final order to Tesla on July 1, requesting it to provide more information about the December 2023 self-driving car recall. NHTSA wants Tesla to provide pre-recall and post-recall drivers. Comparison of the number of times you were prompted to put your hands on the steering wheel. The information is intended to help regulators determine whether Autopilot played any role in 20 crashes involving Tesla vehicles since the December recall.

When Tesla signed a mapping data deal with Baidu, speculation arose about the rollout of self-driving cars across China. However, according to recent statements from Chinese regulators, Tesla is only allowed to test its FSD feature and there are currently no plans to officially launch it.

As if those problems weren’t enough, Tesla has also been plagued by confusing accounting issues. For example, despite having the highest number of problems with its vehicles among major OEMs, Tesla’s warranty claim record remains relatively below the industry average, according to a Warranty Week statistic.

According to rumors, in order to control warranty claim expenses, Tesla has been recording them as a goodwill/SG&A item. This strategy effectively defers warranty costs as sales grow. But now, as sales decline, Tesla faces ballooning warranty claim costs. As a result, Tesla has been trying to postpone service appointments in the hope that customers will choose to have their electric vehicles repaired elsewhere rather than wait months to make an appointment with a Tesla technician. This approach has caused the insurance costs of Tesla vehicles to rise sharply. rise.

Another confusing issue is that Tesla assumes residual value risk for its leased vehicles. In addition, it provides residual value guarantees to outside lessees. However, with used car prices plunging by a third a year, the company has yet to take significant impairment losses.