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Why Tesla will die, and what happens next

Why Tesla will die, and what happens next

Another day, another Tesla bankruptcy story. It seems as though the famous electric car manufacturer seems to always be on the brink of doom. But will it actually happen? And what happens to the industry if Tesla dies? Here’s my take.

Is Tesla really that doomed?

According to financial experts, those in media who write about electric vehicles and e-mobility, and Elon Musk himself, 2019 is going to be the year that Tesla runs out of money - although Musk said in May that his company had 10 months’ worth of cash left, which would see Tesla dies in early 2020.

Tesla finished the first quarter of 2019 with $2.2 billion in cash, but it lost $702 million. A drop off in Model 3 deliveries was blamed, but in May this year the company was able to raise $2.7 billion to keep Tesla alive. Still, these numbers have to be a concern when you consider that the Model 3 was the best-selling luxury car in the United States in 2018. Of the 245,240 vehicles Tesla sold last year, 145,846 were Model 3s.

But is making and selling respectable numbers of cars enough? Tesla’s to-do list is an expensive one. Launching production in China comes with start-up costs, the Model Y SUV needs money put into it if it is going to be a success and then there’s the Tesla Pickup Truck that we’re still hearing is in development too.

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The Model 3 has been a sales success. / © AndroidPIT

Tesla has a kind of Catch-22 problem. Scaling up is vital to the future health of its finances. It needs to be able to build cars quicker as a company. Musk knows this, setting a personal target of 7,000 per week by the end of June. The problem is that scaling up is expensive. And when you’ve don’t have a lot of liquid cash sitting around, what is your solution? Raise more, obviously, but that's not all.

The company is no stranger to burning through cash. The Washington Post reported in August 2018 that Tesla had accumulated $9 billion in operating losses since it was founded. Drastic cost-cutting measures are needed to save Tesla, but it is spending that is needed to reach those production targets.

Then you have the problem of Elon Musk himself. Whether he is offering money-back guaranteed Tesla Powerpack farms in South Australia on Twitter, or promising a new Dog Mode for Tesla cars, it must be impossible to plan resources when unforeseen projects get thrown into the mix like this because the boss of the company got a bit lairy on social media.

What happens if Tesla goes bankrupt?

One of the biggest myths in the auto industry is that if Tesla dies, the electric car dies with it. A couple of years ago, this might have been a palatable hypothesis. Sure, Tesla is still the torch bearer for EVs in 2019, but it is far from alone in the driving EV technology these days.

In terms of the luxury sector of the market, Jaguar is already selling its I-PACE. BMW is investing heavily in EV tech with its iNEXT. The BMW i3 all-electric car is also selling well. What Audi is doing with its E-Tron line of cars is also impressive. The Geneva Motor Show this was was crawling with EV models such as the Audi E-Tron Q4 and E-Tron GT.

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BMW's iNEXT Vision car is pretty incredible. / © BMW

It’s not all about expensive, luxury cars either. Companies like Kia, Ford, Nissan and SEAT (which is leading the urban micro mobility strategy for the Volkswagen Group) are launching more affordable all-electric vehicles this year. Mainstream electric mobility is coming very soon, with or without Tesla.

In countries where environmental incentives and green mobility has been heavily encouraged, EVs are flying. Hybrids and electrics make up 58.4 percent of all new cars in Norway - lots of them Tesla’s - and the incoming bans on combustion engines in Europe will only cause that figure to rise.

Tesla has done more for the electric vehicle industry than any other company, but that doesn’t mean that the electric car needs Elon Musk and co. to survive. Whatever happens to Tesla in the next 12 to 18 months, one thing is set in stone. The electric car is the future, with or without its biggest pioneer.

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4 comments

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  • Matt 4 months ago Link to comment

    No Tesla is an Excellent Car to have I don't want it gone.


  • Elon Musk won't be the downfall of Tesla, because I believe in time his control will be taken away by investors (or Tesla Motors will be sold).

    Tesla Motors will be handled separately from the Boring Company and the Aerospace Company (and again, Elon Musk will be "behave" or risk being removed from power of both).


  • Musk is a prick and a con man. I hope Tesla is sold to someone else and Musk gets kicked out.


    • storm 4 months ago Link to comment

      I think you're right generally. Although i rather like Musk he would benefit from an editor to review his public musings before they became public.

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