Channel stuffing

Tesla has turned the largest profit in its history, and the first recorded by the company in two years.

The electric car maker made more than $300m (£232m) in the third quarter of the year, a result that chief executive Elon Musk called “truly historic” in a letter to investors. Tesla’s share price briefly rose by more than 10pc on the news.

The results are a vindication for Mr Musk, who had assured investors that Tesla would be profitable in the quarter. In the previous three months, the company had made a loss of $717.5m and many analysts had predicted it would have to raise money to stay afloat.

The trick is going to be being able to do this next quarter. Becassue if you pull every trick you can then you can make one q profitable. At the expense of the next…..

17 thoughts on “Channel stuffing”

  1. They’re sitting on a vast backlog of reservations for orders. That’s a channel. Get badly made, requiring repair in the future, stock out to them and that is, economically, channel stuffing.

  2. Yeah. This is his schtick.

    I keep wondering if the people buying shares are that stupid or just that they think someone else is

  3. “But what about the cash flow?”

    Stiff the suppliers for a while, no outgoings. Money in from sales, suddenly lots of positive cash flow!

    There’s tales floating around the net from the last few months of people being given a delivery date for their order, then paying the balance owed, but at the last minute delivery being cancelled, and the VIN changed on the car they were promised, and them not being refunded. The implication being Tesla have sold the car to someone else (for cash) and allocated another on the production schedule to the first customer, but not given them their money back. If you sell the same thing twice profits will definitely rise………

  4. Also, was SSL on this site? Cert expired maybe? Getting a little warning this morning on this device, fairly sure it wasn’t showing up earlier this week.

  5. Come to think of it, isn’t doing that across year end a securities fraud? Seem to remember a chipmaker got into trouble for that some years ago.

  6. Having done that sort of revenue recognition work a while back under US-GAAP fora NASDAQ listed Corp there is some leeway in interpretation of when to take revenue, but much tighter than it was under IFRS at the time and I’m pretty sure SEC is all over Musk at the moment. Possibly now they have more history on vehicle reliability etc they have been able to adjust any retention or provision for warranty to be more favourable which would give them a big one off hit.
    The story about swapping orders implies that they may have increased production rates and are priotising cash buyers jumping the queue to shorten the order cycle for the quarter, but you still have to produce the vehicle.

  7. Alternatively, we could accept Musk’s statements at face value and trust that production hell is over. Delivering 83,500 vehicles in Q3 while finally being able to control production costs would account for the profits.

    Disclosure: The media circus has been fun to watch and I need a distraction from trade war/right wing magic money tree induced economic issues.

  8. “The media circus has been fun to watch”

    I see Musk playing the media as does Trump. Musk keeps himself on the front page.

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