Tesla Earnings: One *Billion* Dollars (Burned)

(Bloomberg Gadfly) -- Well, Tesla finally delivered.

I don't mean the 30 Model 3 cars delivered at last weekend's handover party. I also don't mean second-quarter earnings that beat expectations in the sense that the loss was smaller than anticipated. Not only do earnings not really matter for Tesla Inc.'s investors, the beat can be attributed almost entirely to the company selling a slug of Zero Emission Vehicle credits.

I mean Tesla reported late on Wednesday its first quarter where it burned through more than $1 billion of cash:

Consequently, Tesla's cash on hand fell by roughly $1 billion in the second quarter and ended June at about $3 billion, meaning the company effectively burned through most of the money it raised in March via selling new equity and convertible debt.

Looking back, Tesla's advanced vehicles have defined its brand -- but its need for external funding is the defining story of its business model:

Add that all up and, in broad terms, Tesla has lost almost $1 billion in cash at the operating level since the start of 2012 and roughly another $6 billion has gone out the door in capital expenditure. Funding that has involved raising almost $10 billion from issuing equity and borrowing (the difference equates roughly to the cash Tesla held at the end of June):

Through the end of the year, Tesla expects to spend another $2 billion in capex but says the $3 billion on hand "plus expected cash generated from operations in the second half" will be sufficient, implying it won't need to tap investors again.

As history shows, positive cash from operations is a relative rarity for Tesla. It did manage it in the third quarter last year, but only by yanking various leverspretty disappointing second quarter

All of which makes what happens with the ramp-up of the Model 3 critical. CEO Elon Musk says he expects at least six months of "production hell" on this front. That burning sensation may persist for a while yet.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Liam Denning is a Bloomberg Gadfly columnist covering energy, mining and commodities. He previously was the editor of the Wall Street Journal's "Heard on the Street" column. Before that, he wrote for the Financial Times' Lex column. He has also worked as an investment banker and consultant.

To contact the author of this story: Liam Denning in New York at ldenning1@bloomberg.net.

To contact the editor responsible for this story: Mark Gongloff at mgongloff1@bloomberg.net.