Since Tesla’s second quarter earnings report, catchy headlines have been popping up saying the company is losing $4,000 for every car sold. That figure was reached using some simple math: Tesla reported an operating loss of $47 million for April, May, and June, and in that time, they sold 11,532 cars. Divide the loss by the number of cars sold and you arrive at a $4,000 loss per car. Except, as any Chief Financial Officer will tell you, companies are far more complicated than that.
Reuters reported this week that Tesla “burned $359 million in cash last quarter in a bull market for luxury vehicles”. While the wording may make it sound like Elon Musk has been enjoying some very expensive backyard bonfires, in reality, at least some of this spending has been going into product development. The Tesla Gigafactory, where Tesla plans to roll out enough batteries per year to power 500,000 cars, is currently taking shape in Nevada. Tesla is also hard at work developing their new Model X, a battery-powered SUV that will feature, among other innovations, “falcon wing” doors.
This kind of calculation is nothing new in the electric car industry. When the Chevy Volt was new, an Autoblog article points out, articles claimed that each Volt cost $250,000 to make and then sold for $80,000. “This is great for headlines, but not so much for understanding what’s going on,” Autoblog says. Unless Tesla releases the exact amount it costs to manufacture each Model S, we won’t know for sure, but it seems unlikely that their business model thus far has rested on a car that costs more to make than it does to buy.