A year ago, one noted automotive analyst admitted privately that he thought Tesla might have effectively gone bust.
He had good reason: the link between Tesla’s share price and its financial performance had long since been severed. Even in the wake of this week's surprise quarterly profit and subsequent share price rise, overall revenues were below expectations, and well short of last year's figures.
The reason a banker with huge experience would have questioned Tesla’s viability is simply that the stock market valuation was detached from the real value of the business.
This detachment peaked in 2017, a year in which Tesla delivered around 103,000 cars globally. Ford, by comparison, delivered around 6.5 million cars. In June 2017, the market valued Tesla at $64 billion, rather more than Ford and GM.
Today, Tesla remains highly valued despite very significant losses.
Even with the Model 3 rolling off the production line, Tesla lost $710m in the first quarter of 2018 and $718m in the second quarter. In the third and fourth quarters, it made profits of $311m and $139m respectively, although some claim this was partly because Tesla sold ‘pollution credits’ to other car makers.
But in the first six months of 2019, it was back in the red.
First, there was a 31% drop in Tesla sales between January and March. According to US media, Tesla shifted around 50,900 Model 3s but the aging Model X and Model S netted only 12,100 sales between them. Upshot: a loss of $702m.
The losses were pulled back in April to June of this year, but only to $408m. According to analysts, Tesla also spent $1.5bn from its cash pile and borrowed $500m from Chinese lenders as its new Gigafactory 3 near Shanghai got under way.
The harsh reality was that Tesla’s second quarter profit margin was -19%.
Even so, in September, Tesla is still being valued at well over $40bn. Not bad for a car maker that expects to sell fewer than 400,000 vehicles in 2019 and probably won’t make a full-year profit.
As we head into the latter part of 2019, Tesla is poised to make some big announcements that, it insists, will finally push it into sustainable profits.
At the end of August, the talent of CEO Elon Musk for picking up excitable publicity from Tesla fans was in full effect when pictures from inside the Gigafactory 3 appeared online. Although the building was clearly complete – impressive when construction had only begun in December 2018 – it was not recognisably a car factory.