In a single Elon Musk tweet, the key to Tesla’s India strategy


Then there’s another hurdle that Musk would rather the market didn’t obsess over too much: the need to raise capital. Contrary to Musk’s repeated claims he wouldn’t need to raise capital, Ross said the India launch is out of the question until Tesla has raised capital to the tune of several billion dollars.

“We don’t expect they will even announce anything until they have raised capital, which we expect in the second half of 2018, or the first half of 2019, at the latest,” Ross said, adding that “TSLA will raise additional capital once they show a strong ramp of Model 3s, perhaps 5,000 units per week, and at good margins, so there is a positive story to tell investors.”

Tesla referred questions about its cash needs to its recent Q1 shareholder letter in which the company said that if it executes according to its plan for Model 3 production, then it will at least achieve positive net income excluding non-cash stock based compensation in Q3 and Q4 and expects to also achieve full GAAP profitability in each of these quarters. “Ultimately, the growth of Model 3 and the profit associated with it will help us accelerate the transition to sustainable energy even faster,” the letter said.

Last week at the Tesla annual meeting, Musk followed that up by saying, “I think it is really looking like we will have positive gap net income next quarter as well as positive cash flow in Q3 and Q4. And we, as I have said before, do not expect to need to raise any incremental debt or equity.”

Tesla announced a round of layoffs last week equal to 9 percent of its workforce, or roughly 3,600 employees, mostly salaried positions and with no expected impact on Model 3 production. In an email to Tesla employees explaining the job reductions, Musk wrote the move was required to reduce costs and become profitable.

Ross said he didn’t think Musk was lying about capital requirements, but was being too “optimistic about his production assumptions.”

It’s unlikely Musk could ramp up production to “10,000 Model 3 cars per week, but if he did reach that level, he’d start generating real cash flow and he could then fund himself.”

Over the weekend, Musk sent an email to Tesla employees saying that “radical improvements” are needed to meet quarterly targets.

Ross gave another reason — less specific but maybe equally significant — as to why India may have to wait: “Tesla has too many balls in the air, and any time they have a challenging quarter, they announce a new ‘world-changing vehicle’,” Ross said. “We now have a Model Y, Semi and pickup truck coming, all miraculously without requiring a capital raise.”

Musk may have put the India tweet in its proper place best himself when taking to his favorite online hangout last Friday to communicate about another topic:

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Source : CNBC