Tesla is laying the groundwork for a future that isn’t bound by the problems of today. But will it be able to weather a downturn, or will it stall, dead in the water it was rising from?
How did Tesla make it through the Great Recession?
Tesla Motors nearly went bankrupt during the Great Recession of 2008, but was saved by the US government with low-interest loans in 2009. This research paper examines the company’s financial policies that led to its rescue as well as its present market financial condition. The financial effects of the recession on Tesla from 2008 to 2009 are included. In 2009, the company was down to its last $9 million in cash, selling 937 cars for a $31.5 million loss. Tesla finally decided to file for an IPO in early 2010, with a $100 million offering. Tesla has subsequently invested in its Model S electric automobile in order to profit from it once it is delivered, but its stock has experienced significant volatility since then. Tesla’s financials are examined over time and contrasted to an assessment of the company’s present market position.
What businesses will survive a downturn?
- While some industries are more vulnerable to economic fluctuations, others tend to do well during downturns.
- However, no organization or industry is immune to a recession or economic downturn.
- During the COVID-19 epidemic, the consumer goods and alcoholic beverage sectors functioned admirably.
- During recessions and other calamities, such as a pandemic, consumer basics such as toothpaste, soap, and shampoo have consistent demand.
- Because their fundamental products are cheaper, discount businesses do exceptionally well during recessions.
Is Tesla affected by inflation?
According to Barron’s calculations, metals inflation has added around $2,000 to the average price of an electric vehicle so far in 2022. Higher oil costs are a benefit for Tesla and other electric vehicle manufacturers.
Is Tesla still profitable?
Tesla’s fourth quarter brought in a record profit, with the company reporting a $2.3 billion profit on Wednesday.
It was the company’s second year of profitability, but it was a huge improvement over the $270 million profit in the fourth quarter of last year. The corporation earned $5.5 billion in net income this year, up from $721 million in 2020. Tesla made that profit on little over $17.7 billion in revenue, and it did so while its average sales price continued to fall as the Model 3 sedan and Model Y SUV became more popular.
In the fourth quarter, Tesla produced 305,840 automobiles, up 70% over the previous year. The company delivered 936,172 automobiles in total for the year, falling short of the 1 million vehicles pledged but still an increase of 87 percent over the previous year.
Did Tesla receive bailout funds in 2008?
“I provided the entire sum since I believed the chances of victory were so slim.” All of the funds came from my own pocket. I didn’t want to seek for money from other investors if I thought we were going to die, which I did. “I invested all of the money I received from PayPal into Tesla, Solar City, and SpaceX,” Musk stated earlier this month during a lecture at the Paris-Sorbonne University in Paris.
However, when the financial crisis struck in 2008, Tesla, like other automakers, was on the verge of bankruptcy and in desperate need of funds to stay afloat.
Both GM and Chrysler received billions of dollars in government bailout money in December 2008 to stay afloat. Tesla, on the other hand, needed a miracle to stay in business.
That’s when Daimler, a cash-strapped German automaker at the time, stepped in and invested $50 million in Tesla. However, the investment didn’t come until Tesla was almost dead.
In 2008, who saved Tesla?
The global economy imploded just as Tesla was about to close a $100 million Series E in the summer of 2008, sending the business plummeting toward insolvency by the end of the year.
The failure of Lehman Brothers precipitated a global financial crisis. One repercussion? Raising finance for a business like Tesla has become practically difficult. When behemoths like GM and Chrysler were collapsing, why would anyone take a chance on a small, independent American automaker?
Elon Musk took over as CEO in the aftermath of the catastrophe. All of Tesla’s intentions for the $100 million investment round, however, were thrown out the window. Tesla was unable to construct a new factory or headquarters. The Model S launch had to be postponed, and the firm had to lay off about a quarter of its workforce.
Selling the company would have been a safe bet. Musk, on the other hand, took a chance. After the Series E failed, he supported the company out of his own pocket.
When you consider Elon Musk’s current status as a billionaire, that may not seem significant. However, he had already invested all of the $180 million he earned from PayPal shares in Tesla and SpaceX at the time.
Because Musk was willing to go “net negative, personally,” Steve Jurvetson called efforts to preserve Tesla “the most amazing act of entrepreneurial zeal and dedication” he’d ever witnessed.
Musk stated the company was just three days away from insolvency when a $40 million loan and following financing round eventually closed on Christmas Eve 2008.
A $40 million loan to pull Tesla back from the brink of bankruptcy, however, did not magically turn the ship around. Deepak Ahuja, the CFO, provided strategic guidance.
The Solution: IPO As a Funding Strategy, Not an Exit.
By considering Tesla’s June 2010 IPO as a funding strategy rather than an exit strategy, Ahuja was able to shepherd the business out of its toughest days.
Ahuja was concerned at the time about being a victim of Tesla’s mass layoffs. He’d only been with the company for a few months when the economy collapsed. And he admitted that it could have made sense: “When you don’t need a high-paid CFO, why have one?”
Except in times of financial crisis, when having a strategic, right-hand CFO on board is essential. Musk must have realized this because he kept Ahuja on board to assist Tesla get back on track.
Tesla, in reality, would constantly require additional funds. That’s just the way the auto industry works. That’s why Ahuja and Musk decided to go public. According to Ahuja, if you’re looking for a unique way to express
“An IPO was not an exit option for us. Going to the public market was the greatest method for us to raise finance at the lowest feasible cost. An automobile corporation has a lot of assets. We knew we needed billions of dollars, but no VC in Silicon Valley was willing to give us even $100 million… That was the only reason we went public, even though we knew it would be painful in terms of disclosures, visibility, and so on. It was the best course of action for us.”
Tesla’s financial problems were not miraculously solved by the IPO. However, it aided Tesla’s recovery from a near-bankruptcy situation in 2008, putting the business on track to become the world’s most valuable automaker ten years later.
Who profited the most from the financial crisis of 2008?
Warren Buffett declared in an op-ed piece in the New York Times in October 2008 that he was buying American stocks during the equity downturn brought on by the credit crisis. “Be scared when others are greedy, and greedy when others are fearful,” he says, explaining why he buys when there is blood on the streets.
During the credit crisis, Mr. Buffett was particularly adept. His purchases included $5 billion in perpetual preferred shares in Goldman Sachs (NYSE:GS), which earned him a 10% interest rate and contained warrants to buy more Goldman shares. Goldman also had the option of repurchasing the securities at a 10% premium, which it recently revealed. He did the same with General Electric (NYSE:GE), purchasing $3 billion in perpetual preferred stock with a 10% interest rate and a three-year redemption option at a 10% premium. He also bought billions of dollars in convertible preferred stock in Swiss Re and Dow Chemical (NYSE:DOW), which all needed financing to get through the credit crisis. As a result, he has amassed billions of dollars while guiding these and other American businesses through a challenging moment. (Learn how he moved from selling soft drinks to acquiring businesses and amassing billions of dollars.) Warren Buffett: The Road to Riches is a good place to start.)
What is a recession-proof industry?
Healthcare, food, consumer staples, and basic transportation are examples of generally inelastic industries that can thrive during economic downturns. During a public health emergency, they may also benefit from being classified as critical industries.
What should I buy before the financial crisis?
Having a strong quantity of food storage is one of the best strategies to protect your household from economic volatility. In Venezuela, prices doubled every 19 days on average. It doesn’t take long for a loaf of bread to become unattainable at that pace of inflation. According to a BBC News report,
“Venezuelans are starving. Eight out of ten people polled in the country’s annual living conditions survey (Encovi 2017) stated they were eating less because they didn’t have enough food at home. Six out of ten people claimed they went to bed hungry because they couldn’t afford to eat.”
Shelf Stable Everyday Foods
When you are unable to purchase at the grocery store as you regularly do, having a supply of short-term shelf stable goods that you use every day will help reduce the impact. This is referred to as short-term food storage because, while these items are shelf-stable, they will not last as long as long-term staples. To successfully protect against hunger, you must have both.
Canned foods, boxed mixtures, prepared entrees, cold cereal, ketchup, and other similar things are suitable for short-term food preservation. Depending on the food, packaging, and storage circumstances, these foods will last anywhere from 1 to 7 years. Here’s where you can learn more about putting together a short-term supply of everyday meals.
Food takes up a lot of room, and finding a place to store it all while yet allowing for proper organization and rotation can be difficult. Check out some of our friends’ suggestions here.
Investing in food storage is a fantastic idea. Consider the case of hyperinflation in Venezuela, where goods prices have doubled every 19 days on average. That means that a case of six #10 cans of rolled oats purchased today for $24 would cost $12,582,912 in a year…amazing, huh? Above all, you’d have that case of rolled oats on hand to feed your family when food is scarce or costs are exorbitant.
Basic Non-Food Staples
Stock up on toilet paper, feminine hygiene products, shampoo, soaps, contact solution, and other items that you use on a daily basis. What kinds of non-food goods do you buy on a regular basis? This article on personal sanitation may provide you with some ideas for products to include on your shopping list.
Medication and First Aid Supplies
Do you have a chronic medical condition that requires you to take prescription medication? You might want to discuss your options with your doctor to see if you can come up with a plan to keep a little extra cash on hand. Most insurance policies will renew after 25 days. Use the 5-day buffer to your advantage and refill as soon as you’re eligible to build up a backup supply. Your doctor may also be ready to provide you with samples to aid in the development of your supply.
What over-the-counter drugs do you take on a regular basis? Make a back-up supply of over-the-counter pain pills, allergy drugs, cold and flu cures, or whatever other medications you think your family might need. It’s also a good idea to keep a supply of vitamin supplements on hand.
Prepare to treat minor injuries without the assistance of medical personnel. Maintain a well-stocked first-aid kit with all of the necessary equipment.
Make a point of prioritizing your health. Venezuelans are suffering significantly as a result of a lack of medical treatment. Exercise on a regular basis and eat a healthy diet. Get enough rest, fresh air, and sunlight. Keep up with your medical and dental appointments, as well as the other activities that promote health and resilience.
Has Tesla increased its prices?
Tesla has boosted prices on its entire electric vehicle lineup. Prices have risen by 5 to 10%, with the company’s cheapest car, the Model 3 Rear-Wheel Drive, now starting at $46,990, and the company’s top-end Model X Tri motor increasing by $12,500, from $126,490 to $138,990.
It’s the company’s second price hike in less than a week, following a hike in the cost of some long-range models on Wednesday. Today’s price hikes, on the other hand, are not just larger than last week’s, but they also apply to every vehicle the company sells.
Here’s how those price hikes look (old prices acquired from archival copies of Tesla’s website via Wayback Machine, dated March 10th or later):
Tesla and its outspoken CEO Elon Musk have yet to comment on the latest price hikes, although a variety of reasons are likely to have played a role. On Monday, Musk tweeted that “Tesla & SpaceX are seeing significant recent inflation pressure in raw materials & logistics” inflation in the United States is up 7.9% this year, owing to rising energy, food, and service costs, while raw materials used to build electric vehicles (such as steel, nickel, and palladium) are skyrocketing due to Russia’s invasion of Ukraine.