Photo: Tesla Inc.
Whenever a less than favorable article about Tesla or Elon Musk shows up, the company's zealots are quick to say the author is an advocate of the oil industry without presenting any proofor bothering to see if maybe there is some truth to what that person is saying.
We don't know who's behind The Economist and what is the agenda of this publication - if any - regarding alternative fuels, but we have read the piece where it says that statistically speaking, Tesla is bound to fail at some not too distant point.
And you don't really need to have a Master's degree in economics to realize that you can't keep spending indefinitely without starting to make some profits as well. And we're not talking spare change either: five of the companies singled out by The Economist - Uber, Netflix, Tesla, Nexterra Energy, and Chesapeake Energy - have spent $100 billion over the past decade.
The fact Tesla posts losses very quarter has become the norm now, catching the attention of Volkswagen's CEO, Matthias Mueller, who recently snapped at the EV maker saying that comparing it to his company was like "apples and oranges." Tesla has been investing heavily, but how can the company sustain this business model?
The Economist suggests there are three elements at play that complement each other: vision, fast growth, and financing. If there's anything that Elon Musk has plenty of is vision: not only does he want to use rockets for transport, but he's already designed the Martian colony that will be awaiting our children a few decades from now.
The growth is also based on the promise of imminent profits once a certain point is reached. As an emerging carmaker, Tesla had to start from scratch so it's been constantly investing in its factories and charging infrastructure. However, the Model 3 mass-market sedan should be the tipping point.
Finally, Tesla has always found new ways to raise cash whenever needed. Its stock value is at an all-time high, but it also profited from the 400,000 reservations placed for the Model 3, which gave the company an instant cash infusion worth $400 million.
But the author says this business model is destined to fail, and points toward how few of the top 1,000 large American firms make a habit of losing over $1 billion in one year. They say the chances of these businesses surviving are slim, but not impossible. In Tesla's case, it probably all comes down to the success of the Model 3 and how quickly it can get production running at full blast.
But even if Tesla were to fail, it has already started the EV revolution. Just look at all the big carmakers scrambling to come up with their own competitive battery-powered models, and you'll see that "the harm" has been done. If Tesla's a goner, its legacy will live on.
And you don't really need to have a Master's degree in economics to realize that you can't keep spending indefinitely without starting to make some profits as well. And we're not talking spare change either: five of the companies singled out by The Economist - Uber, Netflix, Tesla, Nexterra Energy, and Chesapeake Energy - have spent $100 billion over the past decade.
The fact Tesla posts losses very quarter has become the norm now, catching the attention of Volkswagen's CEO, Matthias Mueller, who recently snapped at the EV maker saying that comparing it to his company was like "apples and oranges." Tesla has been investing heavily, but how can the company sustain this business model?
The Economist suggests there are three elements at play that complement each other: vision, fast growth, and financing. If there's anything that Elon Musk has plenty of is vision: not only does he want to use rockets for transport, but he's already designed the Martian colony that will be awaiting our children a few decades from now.
The growth is also based on the promise of imminent profits once a certain point is reached. As an emerging carmaker, Tesla had to start from scratch so it's been constantly investing in its factories and charging infrastructure. However, the Model 3 mass-market sedan should be the tipping point.
Finally, Tesla has always found new ways to raise cash whenever needed. Its stock value is at an all-time high, but it also profited from the 400,000 reservations placed for the Model 3, which gave the company an instant cash infusion worth $400 million.
But the author says this business model is destined to fail, and points toward how few of the top 1,000 large American firms make a habit of losing over $1 billion in one year. They say the chances of these businesses surviving are slim, but not impossible. In Tesla's case, it probably all comes down to the success of the Model 3 and how quickly it can get production running at full blast.
But even if Tesla were to fail, it has already started the EV revolution. Just look at all the big carmakers scrambling to come up with their own competitive battery-powered models, and you'll see that "the harm" has been done. If Tesla's a goner, its legacy will live on.
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