What Would Happen To Tesla Cars If The Company Goes Bankrupt?

Tesla Cars

Tesla, Inc. is a Palo Alto, California, USA-based electric vehicle and clean energy company founded on July 1, 2003, by Elon Musk and 4 other founders. Since its establishment, Tesla is accelerating the world’s evolution to sustainable energy with electric cars, solar energy, and integrated renewable energy solutions for homes, businesses, etc. Electric cars from Tesla become very popular and its yearly sales in 2021 increased at least 30% from the total number of sales in 2020. However, over the past few years, Elon Musk has turned his focus from tesla to SpaceX. So, what would happen to Tesla cars if the Tesla company stopped producing electric cars or Tesla goes bankrupt?

If you are a Tesla car owner then this is a very concerning topic for you. However, there is nothing to worry about because car companies with certain sizes have to make sure that the service and spare parts of their products are available at least 10 years after the end of the production. In fact, the company has to ensure that the customer will get after-sell service if the production becomes stop or the company goes bankrupt.

Overview Of Tesla

Overview Of Tesla

Tesla company was established with a mission to accelerate the world’s transition to sustainable energy. From the start, Tesla Motors was trying to develop an electric sports car and they were receiving funds from a variety of sources including PayPal cofounder Elon Musk. Elon Musk contributed more than $30 million to Tesla Motors and he became chairman of the company, beginning in 2004. In 2008, Tesla Motors released its first electric sports car that achieved 245 miles (394 km) on a single charge. However, in 2012, Tesla stopped producing the Roadster and started to concentrate on its new Model S sedan. This car is available in three battery options and it has estimated ranges of 235 or 300 miles (379 or 483 km) on a single charge. In 2014, Tesla Autopilot was made available on the Model S cars. Under Elon Musk, Tesla released the Model X, a “crossover” vehicle with a maximum battery range of about 340 miles (547 km) and seating for up to seven. Tesla started to build large factories to produce batteries and vehicles. These factories are available in Reno, Nevada, Buffalo, New York, and Shanghai, China. Later, tesla brings the Model 3 and Model Y to meet the high demand for electric cars in the USA. Recently Tesla has announced that they will release several new models in the early 2020s.

Elon Musk And Tesla

Elon Musk And Tesla

Since taking over the charge as Chairman, Elon Musk brought a revolutionary change in Tesla. However, Elon Musk is not concerned or bothered if Tesla goes bankrupt. Musk was recently interviewed for CBS’ 60 Minutes show and said – 

“If somebody comes and makes a better electric car than Tesla, and it’s so much better than ours that we can’t sell our cars and we go bankrupt, I still think that’s a good thing for the world.”

But Tesla workers and the Tesla car owners might not agree with Elon Musk regarding the bankruptcy of Tesla. There is no question that Tesla is the king when it comes to electric cars but Elon Musk’s unusual management style and builds quality issues have created some questions. Moreover, the company has shafted money like a waterfall which also created some concerns among the investors of Tesla. A report from Goldman Sachs suggests that Tesla needs to face debts of nearly $9 Billion. So, how Tesla will manage these huge debts will decide the fate of this electric car company. 

The advantage of Tesla is, when it comes to an electric cars, they are the default choice. But things have changed in recent years. Now Jaguar, Mercedes, Audi, BMW, and Porsche have all created EVs to challenge tesla. Moreover, the mainstream manufacturers are giving more effort into EVs. On the other hand, various reports indicate that Tesla isn’t looking to fundraise to secure its future, even with the rise of new competitions. So, if Tesla doesn’t manage their finance properly and bring new models to meet the competition then they have to bring more models and generate more sales.

Tesla’s Financial Health

If you want to know the financial condition and future of tesla then you have to go through the company’s balance sheets to quickly evaluate Tesla’s business condition. Through the balance sheet, you will know Tesla’s total commitments that will come due within a year from the date the balance sheets were created. Between March 31, 2021, and March 31, 2022, Tesla is required to deliver a combination of cash and products that are estimated to cost $15 billion. Having a good balance between current liabilities and non-cash liabilities indicates a strong financial profile. For Tesla, they have already received cash upfront for these liabilities. Therefore, Tesla’s realistic short-term liabilities are slightly less than the actual amount. 

The total short-term liabilities of Tesla are about $12.5 billion for fiscal 1Q 2021. Moreover, tesla has total cash and cash equivalents of $17 billion as of fiscal 1Q 2021. On the other hand, Tesla’s total short-term commitments are about $12.5 billion. So, it is quite clear that Tesla’s total cash is much greater than the total adjusted current liabilities. Tesla has cash leftover of nearly $5 billion after accounting for all short-term liabilities. So, according to the above statistics, Tesla can meet its short-term commitments that might come due within a year.

Final Thoughts

Finally, it is unlikely for Tesla to go bankrupt in 2021 or 2022, or in the next five years. So, if you own a Tesla car then you don’t have to worry about Tesla going bankrupt. For now, Tesla’s financial health is as solid as a rock. However, if Tesla goes out of business, then they will continue their customer service and after sell service for at least 7 – 10 years.                                     

Last Updated on November 8, 2021 by Musa D

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