Barron’s cited my concerns from my Thursday report, which I opened with:

Elon Musk admitted Tesla is burning billions at Austin & Berlin plants—just as he saw Q2 becoming "super bad" as I warned cuz plunging China sales mean it can't mask big losses as usual.

Elon Suddenly Admits Massive Tesla Losses (Because Other News Out Soon Is Even Worse) 6/30/22

In Barron’s:

There are a couple of other challenges investors trying to project free cash flow are facing. “It doesn’t help that investors can only guess how such a sizable decline in China operations hurts Tesla’s profitability and cash flow,” wrote Bond Angle founder Vicki Bryan on Friday.

Bryan believes Tesla’s China plant accounts for the majority of the free cash flow the company generates. There are a few reasons analysts believe Chinese profitability is higher than profits generated in the U.S., including arcane deferred tax accounting as well as the positive impact the Chinese plant had on overall profit margins shortly after it started up. Exactly how much higher, as Bryan points out, is difficult to know. And with Q2 production disrupted mainly in China, the impact on cash flow might be bigger than investors expect.

Bryan also expressed concerned with Musk’s money furnaces in her report. “There should be like a giant roaring sound which is the sound of money on fire,” said Musk in a recent interview with the Tesla Owners of Silicon Valley Club. “Berlin and Austin are losing billions of dollars right now.”
Tesla Has a China Problem. What It Means for the Stock, Barron’s, 7/3/22.

Sure enough, Tesla reported weak Q2 deliveries which tracked my estimates and trailed market average consensus—mostly, I suspect, due to substantially lower sales in China. See here my note on that out Saturday: Soft Tesla Q2 Deliveries Disappoint, 7/2/22.

As with everything Tesla, follow the actual money.

Stay tuned.

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