Quote:
Originally Posted by accord1999
It's not something that I discovered, it's usually brought up whenever Tesla's gross margins are talked about without acknowledging its SG&A. For comparison using financial information from Google Finance , Toyota has a gross margin from 2016 of 20.4% but a SG&A of only 10.4%; Honda's gross margin is 22.4% and SG&A of 11.4%. For American companies, GM's is 12.8% and 7.0%, while Ford is 15.6% and 8.0%.
A good ratio between gross margin and SG&A is 2:1, with well-run Japanese auto manufacturers capable of 20%+ gross margins even when their product line is mass market. While some Tesla SG&A may be in preparation for the Model 3, the complaints about service backlogs and crowded charging stations during peak periods may indicate its SG&A spending is still inadequate.
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Given the ramp up of the model 3, you'd expect a net loss at this point. Not sure how your explanation raises flags about the entire business model in the long term. Their cash flow will be just fine once Tesla Energy products launch.
There are plenty of talking heads out there stating that Tesla is doomed to fail, unprofitable, etc. Reality is that their investors and customers don't care, because they want them to succeed and disrupt the industry.