Sign up to receive 5 free days of our daily summary for tech news.

The Truth about Tesla’s Cash Burn

In its most recent quarter, Tesla Motors reported negative free cash flow of $558 million, raising alarms from analysts that the company could run out of cash by year’s end. Even the announcement of a new $500 million credit facility last month has not quieted speculation that the company will need more money.

“They may need access to further funding,” Nishit Madlani, an analyst at Standard & Poor’s, said recently in an interview.

Tesla’s cash burn—its stockpile has dropped from $2.7 billion to $1.5 billion in the last three quarters—has drawn gawkers on Wall Street and in the press. Most of the attention has been on its massive capital expenditures, which capture the imagination and are indeed the major driver. The company has said it plans total capital expenditures of $1.5 billion this year, including its “Gigafactory” battery plant in Nevada and a paint shop being touted as the world’s most advanced.

But new factories only tell part of the story.

No subscription? You're missing out.

Join the high-powered community of tech and business leaders who rely on The Information's original news and in-depth reporting.

“Everything depends on how the launch goes,” Mr. Madlani said. “It could be a short-term issue of CapEx versus revenues, if things go according to plan.”

Hendrik Laubscher commented on this article.
Read comments from top tech and industry leaders
Joe Lonsdale
Joe Lonsdale
Founding Partner, Eight
Chamath Palihapitiya
Chamath Palihapitiya
Founder & Managing Partner, SocialCapital
Tina Sharkey
Tina Sharkey
CEO, Brandless
Jonah Peretti
Jonah Peretti
CEO, Buzzfeed
Adam D'Angelo
Adam D'Angelo
CEO, Quora
Brit Morin
Brit Morin
Founder & CEO, Brit + CO
Dustin Moskovitz
Dustin Moskovitz
Co-Founder, Asana
Christina Miller
Christina Miller
President & General Manager, Turner
Max Levchin
Max Levchin
CEO, Affirm
Adam Mosseri
Adam Mosseri
Director of Product, Facebook
Alex Mather
Alex Mather
The Athletic
Martha Josephson
Martha Josephson
Partner, Egon Zehnder
James Murdoch
James Murdoch
Co-Chief Operating Officer, 21st Century Fox
Andrew Kortina
Andrew Kortina
Founder, Venmo
Ben Chestnut
Ben Chestnut
Co-Founder & CEO, Mailchimp
Ruchi Sanghvi
Ruchi Sanghvi
VP Operations, Dropbox
Login or Subscribe to follow the discussions happening here and real-time in our   Slack Community.
Tesla is banking on a huge fourth quarter, expecting positive cash flow inclusive of capital expenditures. Hiccups could prove costly.