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It should be quite clear by now that Tesla is structurally unprofitable as an automaker.

It should be no secret by now that Tesla (TSLA) missed both its earnings and revenue estimates pretty badly. If you think the worst is over though, think again. Not only did the shareholder letter paint a disastrous picture of Q2, but the future also looks pretty bleak as well. Tesla remains an extremely dangerous investment even at its current lower price level.

The record quarter

In our last article, we pointed out that despite Tesla’s record deliveries number, it was likely going to report a loss for Q2 due to multiple factors. Well, that turned out to be true, but we were expecting a loss of $100-200mil without credits, not a loss of $370mil with credits. The massive loss caught us by surprise and makes us further question the sustainability of Tesla’s business model.

The loss itself isn’t very impressive. Tesla has reported far larger quarterly losses multiple times, including in Q1 2019. The impressive part is that Tesla managed to report this loss in a quarter in which it delivered record amounts of cars. Number of cars delivered in Q2 even beat Q3 and Q4 of 2018, in which Tesla delivered its first two consecutive quarters of profits.

If you exclude regulatory credits, the loss deepens to nearly $500mil. Its honestly quite hard to think of other companies that can have losses of this magnitude after reporting record revenues.

It should be quite clear by now that Tesla is structurally unprofitable as an automaker. They can’t make sustainable profits on high-margin cars, the Model S and X, and they can’t make sustainable profits on low-margin cars, the Model 3, even with record volumes. […]

Overall, Tesla continues to report losses and burn cash. It may have taken steps to quell investor concerns about its liquidity, possibly to prepare for another raise, but eventually its reputation will degrade and it will have a much harder time raising capital, and that will be its eventual demise.

We’re not calling Tesla the next Enron, but the red flags are clear and many, and Tesla’s actions stand in stark contrast to its words. Tesla continues to be uninvestable.

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