Tesla discloses worst quarterly zinger of a loss ever, burns $1.1 billion cash wolf street gas x strips ingredients

The dizzying hype and promises emanating from Tesla can just blow you away if you don’t brace for them. But beyond them, what Tesla proudly announced today was a quarterly net loss attributable to common stockholders of $710 million. This was more than double its record loss a year ago, and its largest net loss ever in its history now spanning over a decade. It was the fifth relentlessly mind-blowing quarterly record loss in a row:

There is one rule that applies to Tesla: The more it sells, the more it loses. Not exactly an ingenious business model. Total revenues – automotive and energy combined – rose 26% to $3.41 billion in Q1. This 26% increase in revenues caused a 114% jump in net losses.

This gives Tesla a global market share of about 0.15%. If Tesla were able to multiply its deliveries by a factor of six right now – so from 30,000 vehicles a quarter to 180,000 a quarter, right now – its global market share would still be less than 1%.

In other words, in terms of overall vehicle sales, Tesla simply doesn’t matter. It’s just a niche automaker. There’s nothing wrong with being a niche automaker. Except for two things in Tesla’s case: Its ludicrous market capitalization, which is still an inexplicable $50 billion, and its mega-losses and cash-burn that investors – the true believers – are still all too willing to feed with new money.

In terms of living up to its projections, well forget it. Tesla’s projection of producing 5,000 Model 3 vehicles per week by the end of last year has long ago swirled down the toilet. The projection has been replaced with other projections that have since swirled down the toilet as well. In reality, in Q1, Model 3 production averaged about 800 per week.

It’s still dreaming about a 25% gross margin for the Model 3 long-term. However, “in the medium term” – eternity? – it will face continued margin pressures “due to higher labor content in certain areas of manufacturing where we have temporarily dialed back automation, as well as higher material costs from recently imposed tariffs, commodity price increases and a weaker US dollar.”

Cash flow was a horror story. In the quarter, Tesla burned $398 million in its operations and another $729 million with capital expenditures, including “Payments for the cost of solar energy systems, leased and to be leased,” and “business combinations.” This adds up to a total of $1.13 billion in cash, POOF, gone in three months.

Maybe investors and perhaps even the true believers and Wall Street hype promoters are getting tired of the hype that is supposed to cover up for the broken promises, record losses, mind-blowing cash burn, and the relentless inability to mass-produce vehicles. In after-hours trading, Tesla’s shares are down nearly 5%. One of Musk’s other outfits is The Boring Company. As a perfect match, Tesla should be renamed, The Hopeless Company.

To remain in a company closer in size to Tesla, Porsche AG tried to outsource part of the Boxster convertible production to Valmet of Finland and things didn’t turn out too well. Uneven quality control and big headaches with the supply chain were just two of the issues the people at Stuttgart faced.

In the end when Porsche became merely a division of VAG they did the math and simply bought Karmann’s factory in Niedersachsen when the latter went bankrupt in 2009. This factory has been dedicated to Porsche “lower tier” models such as the Boxster and to provide extra capacity for other high end models from the VAG group.

In a bizarre twist of fate, while Karmann had been in decline for years what contributed to its final demise was the Chrysler Crossfire. Chrysler outsourced to Karmann not merely final assembly of the Crossfire but a good chunk of design and engineering. It was a disaster, but again the managers at Chrysler at the time were very “hot” on outsourcing because they thought they could beat Honda and Toyota at their own game, blissfully ignoring those companies may outsource component engineering to other companies, but these are companies they own or directly control (such as Denso and Nissin) and the whole project is always overseen by managers from the parent company who have pretty much full powers.