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Can Tesla Survive Without A Capital Raise?

To analyze whether Tesla will survive on its own without capital injection, the best place to start off is the company cash flow statements. The cash flow statements basically disclose cash flow from operation, cash flow from financing activities and cash flow from investing activities. Through cash flow analysis, investors can understand how cash is used and generated as well as how much cash is left after paying off debts during the normal course of the business operations.

Generally, we are trying to understand how well Tesla manages its cash position. Through cash flow analysis, we can get to find out whether Tesla needs capital raise.

The following discussion mainly focuses on 3 major parts of Tesla cash flow statements, namely: (1) Cash flow from operating activities, (2) Cash flow from investing activities and (3) Cash flow from financing activities.

When we perform cash flow analysis, cash flow from operating activities is usually the first place to look at. The reason being that the operating cash flow depicts the health of Tesla core operations which are primarily sales of electric cars and energy products. In other words, if the cash generated from the core operations does not seem to be sound, the whole company financial health will be in trouble.

The following chart describes Tesla operating cash flow.

Chart of Tesla Operating Cash Flow

Tesla Cash Flow from Operating Activities

Tesla Cash Flow from Operating Activities

The chart above shows the quarterly cash flow from Tesla core operation for the past 5 years from 2015 to 2019.

From the chart above, out of the past 18 quarters, only 6 quarters were cash flows positive. In other words, the company had been burning more cash than it can make in most quarters during the usual course of its business operations.

For example, in 1Q19, the company spent more than $600 million in its operating cash flow which is seen as a negative cash flow in the chart above. From the 1Q 2019 cash flow statement (snapshot below), the negative operating cash flow was primarily caused by the increase in inventory of about $500 million from a year ago. The build up of inventory has caused a cash outflow of more than $600 million in 1Q19 from the prior quarter a year ago.

Tesla 1Q19 Cash Flow Statements

Tesla 1Q19 Cash Flow Statement

Nevertheless, there are some quarters when the company generated positive operating cash flow such as in 3Q18 and 4Q18 when the deliveries of Model 3 was at record high. From the chart above, the cash flow generated from operations were roughly $1.4 billion and $1.3 billion in 3Q18 and 4Q18 respectively. The impressive cash flow was a result of positive net income due to the record Model 3 deliveries.

Moreover, Tesla also managed to achieve positive operating cash flow of roughly $860 million in the latest quarter of 2Q19. This quarter is the perfect example of the company generating positive operating cash flow while having a negative net income.

From the following snapshot, the primary reason of having a positive cash flow from operating activities was the narrower net loss. As seen from the snapshot below, net loss was $500 million less compared to the quarter a year ago. Other than a narrower net loss, Tesla also spent considerably less in inventory in this quarter compared to a year ago.

Tesla 2Q19 Cash Flow Statements

Tesla 2Q19 Cash Flow Statement

All in all, despite having several quarters of cash flow positive, Tesla is still losing much of its cash through operating activities. To survive without capital raise, Tesla needs to be consistently generating positive cash flow from its core operations.

The extra cash generated from operating activities can be used to pay off debt, invest in the company expansion and even pay a dividend in future. Without a consistent positive cash flow from operations, Tesla would have a hard time running its business without constantly heading to the capital market for the much needed liquidity.

Next we will look at Tesla cash flow from investing activities which mainly focuses on the company capital expenditures.

Tesla Cash Flow from Investing Activities

Tesla Cash Flow from Investing Activities

Tesla Cash Flow from Investing Activities

Cash flows from investing activities were primarily related to capital expenditure. Capital expenditure (CAPEX) is the expansion of the company manufacturing capability. It relates to the purchase of property, plant and equipment. For example, the construction of Gigafactory 1, Gigafactory 2, Tesla Factory, Gigafactory Shanghai and the purchase as well as the upgrade of machinery for the manufacturing of Model 3 and Model Y, all are part of capital expenditures.

Here is a snapshot of Tesla cash flow from investing activities:

Tesla Cash Flow for Capital Expenditures

Tesla Cash Flow for Capital Expenditures

Cash Flow for Solar Energy System

In addition to capital expenditure, cash spent on design, acquisition and installation of solar energy system under operating leases is also classified as cash flow from investing activities. For example, when Tesla has got a contract to build a solar energy system for a customer and will lease the asset back to the customer when it’s done, the cash spent on constructing the asset is classified under cash outflow from investing activities. The solar energy system would be classified under operating lease asset in the balance sheet.

Cash Outflow for Business Acquisition such as SolarCity

Moreover, cash flows from investing activities also include cash spent on acquisition of other businesses. The cash outflow classified under this category will be net of cash of the business acquired. For example, if the business to be acquired has a positive cash balance, the resulting net of cash would be the difference between the cash balance and the cash spent on acquisition of the respective business.

Readers may have noticed that cash outflow during 2016 did not get worse upon the acquisition of SolarCity. Basically Tesla had spent more than $2 billion in acquiring SolarCity. But cash outflow from investing activities did not drastically increase during the entire year of 2017.

The reason is that the acquisition of SolarCity was entirely paid by stock issuance instead of cash. As a result, you don’t see any cash outflow getting worse in 2016 for the acquisition of SolarCity.

$4.5 Billion of Cash Outflow in 2017?

In addition, you may notice that cash flow from investing activities during 2017 has come to more than $4.5 billion alone in that year.

Why did Tesla spend so much cash on investing activities in that year? My best guess is that the company had been investing heavily during that year in expanding Gigafactory and upgrading tools and machinery for production ramp of Model 3 in 2018.

From the chart above, cash flows from investing activities for Tesla are mainly negative because the company has been spending cash to purchase property, businesses, tools and machinery.

In general, cash spent on investing activities are seen as a vital part of a business expansion strategy. Without spending cash in upgrading its plant and equipment, acquiring businesses and assets, Tesla would be slowly left behind of its competitors.

Chart of Tesla Capital Expenditure

Tesla Capital Expenditure

Tesla Capital Expenditure

The chart above shows Tesla capital expenditure which is part of the cash used in investing activities. As shown in the graph above, Tesla cash outflow from capital expenditure made up as much as 80% of the cash used in investing activities.

As the plot shows, Tesla capital expenditures have been scaling down in recent years. Tesla spent the most on capital expenditures in 2017. Since 2018, the company has been reducing its investment in plant, property and equipment.

The reason for this reduction in capital expenditure may have been due to capital saving that the company has carried out in recent years. From prior discussion, Tesla has been operating in the red in terms of cash flow from operations. As such, it might be the right move for the company to reduce its capital intensive expansion and focus on improving its operating cash flow.

Coming back to the question of Tesla survival on its own without relying on capital raise, Tesla would need to improve its cash flow from operation before embarking further on any capital expenditures. As of the latest quarter, Tesla has not consistently made any meaningful progress in generating positive operating cash flow.

For this reason, Tesla has always been depending on external capital raise for its working capital. Without which the company would immediately go into bankruptcy as its business operation has already consumed much of the needed liquidity let alone capital expenditures.

So far we have talked about capital raise but where is this shown in the cash flow statements? The answer lies in the cash flow from financing activities which is covered in the next discussion.

Tesla Cash Flow from Financing Activities

Tesla Cash Flow from Financing Activities

Tesla Cash Flow from Financing Activities

Cash flows from financing activities are primarily related to debt issuance or repayment. Aside from debt related activities, cash flows from financing activities also cover cash inflow from the issuance of common stocks. If the company is buying back its shares or paying a dividend, there will be cash outflow from such activities in cash flow from financing activities.

Here is a snapshot of Tesla cash flow from financing activities:

Tesla Cash Flow Statements

Tesla 2Q19 Cash Flow Statements for Financing Activities

When we look at the graph above, most quarters were cash flow positive from financing activities. A deeper analysis reveals that the company has been offering debt and issuing stocks in exchange for cash in most of these quarters.

Examples of Cash Inflow from Debt Issuance and Stock Offering

For example, in 2Q16 when cash inflow from financing activities was as much as $2 billion, the increase in cash was primarily due to a public offering of 7.9 million of common stocks which has netted Tesla $1.7 billion in cash.

In 4Q16, there was also an inflow of cash from financing activities of $1.37 billion. According to the 4Q16 annual report, the positive cash flow was due to a $995.4 million of proceeds from issuance of debt.

In 1Q17, Tesla has gotten $966.4 million and $400.2 million respectively from issuance of convertible notes and public offering of common stocks.

In 3Q17, the company has issued another notes offering which had netted about $1.8 billion of cash.

Based on the chart above, cash flow from financing activities in 2Q19 was more than $2 billion. As with most cases, Tesla managed to raise $1.82 billion of capital (shown in the snapshot above) through the issuance of convertible bond. In the same quarter, Tesla also issued more than $800 million of common stocks (shown in the snapshot above) to raise cash.


  • In conclusion, Tesla will not survive long without external capital injection if the company continues to burn more cash than it can make from business operations. Moreover, the cash flows from operations must be sufficient to cover capital expenditure for the company to remain competitive.
  • In addition, Tesla does not have any free cash flow as it has been burning more cash than it can generate during the normal course of its business operation. Free cash flow is the cash left after deducting operating cash flow from capital expenditures.
  • For the time being, we are seeing that Tesla continues to have its capital funded through debt issuance and stock offerings as seen from cash flow from financing activities.


1. All financial figures in this page were obtained from multiple Tesla quarterly and annual reports through its Investor Relation website: Tesla Investor Relations.

2. Featured image was obtained from Maurizio Pesce.

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