Tesla's debt (NASDAQ:TSLA ) is not as high as that of rival legacy automakers, Toyota, Ford, GM, Daimler, and BMW. TSLA’s long term debt has been the topic of choice for bears. It’s often the reason doomsday scenarios play in TSLAQ's heads and is commonly a factor used to vilify Elon Musk.
It turns out, however, that TSLA’s US$13 billion dollar debt is chump change compared to the debt of legacy car manufacturers. Tesla enthusiast @MontanaSeptic shared his findings concerning the long term debts of big names in the auto industry, which were based on KyleHubb's post in the Tesla Motors Clubforum. This is what he found:
VW has about $211B in long term debt. Toyota has about $185B in long term debt. Ford has about $154B in long term debt. GM has about $100B + unpaid bailout loan of $14B. Daimler $106B in debt. BMW $127B in debt. Tsla only has $13B in long term debt.— Montana Septic (@MontanaSeptic) November 29, 2019
According to YCharts, TSLA’s total long term debt as of September 30, 2019, was precisely USD$13.34 billion. In comparison, the same site reported General Motors had an overall long term debt of US$104.47 within the same period. YChart’s similar findings prove @MontanaSeptic didn’t just get his numbers out of thin air. There is a basis for his estimations.
Around the latter end of 2018, many TSLA bears were pushing the narrative that Elon Musk’s electric car company would go bankrupt due to its long term debt and the upcoming payments for those debts in early 2019. A 2018 article published in The Drive titled "Here’s Why Tesla Will Go Bankrupt in 2019" reveals much of this perspective. Below is an excerpt from that article that sums up how TSLAQ thought before Tesla's 2018 Q3 (and subsequently, 2019 Q3) results were announced.
“The facts: Tesla is carrying $10.1 billion in debt, and Musk has to return to the capital markets by the first half of 2019 to refinance at least a portion of that. This has created excruciating pressure on the company to start turning a profit to help entice prospective financiers.”
Tesla did struggle in the first half of 2019. In Q1, TSLA bears were ecstatic when the company met difficulties delivering the Model 3 to Europe and China, resulting in a loss that was augmented by the payment of a $920 million debt on March 1, 2019. TSLAQ also jumped with joy when the company posted a disappointing loss despite record deliveries in 2019 Q2. Although, it must be noted that Tesla didn’t need a bailout to pay its debt in Q1. The company did exactly what The Drive’s article suggested it needed to do: it paid off debt—successfully, and in cash. It didn’t stop TSLAQ from depicting grim scenarios for Q3 and celebrating the company’s “failures,” though.
Tesla Q3 results:— Elon Musk (@elonmusk) October 23, 2019
- Shanghai Giga ahead of schedule
- Model Y ahead of schedule
- Solar installs +48% from Q2
- GAAP profitable
- Positive free cash flow
Much to the TSLAQ's surprise, Tesla turned the tables on them in Q3 2019. The company reported a US$6.3 billion revenue last quarter, and Elon Musk announced Tesla was GAAP profitable. Musk also shared that the all-electric car company was actually ahead of schedule with Shanghai Gigafactory 3 and the Model Y.
Since then, many firms have flipped their stance on TSLA stocks and their forecasts for it future, though the company still has a long way to go. One such company was S&P Global, which changed its outlook on TSLA bonds from negative to positive after Tesla released its Q3 earnings report, reported MarketWatch. TSLA stock has also returned back to levels above $320 per share, resulting in some burns to bears during its quick recovery.
TSLA bears and skeptics aren’t talking much about long-term debt these days. Instead, they have chosen to question the sustainability of Tesla’s Q3 earnings, which may not be the best narrative to perpetuate, given that ‘sustainability’ is Tesla’s game.
But as Elon Musk has said when referring to challenges in the full self-driving market, Tesla is ready for headwinds ahead. It is, as Musk, stated, "Game, Set, Match."
Disclosure: I hold no TSLA shares and have no plans to initiate any positions within the next 72 hours.
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