Ron Baron’s fund owns over a million Tesla shares — but he doesn’t seem to know what Elon Musk is spending money on (TSLA)

tesla factory

  • Investor Ron Baron argued on CNBC that Tesla is burning through lots of cash because the company is building expensive factories.
  • But Tesla isn't currently building any new factories.
  • Tesla is trying to complete its Nevada Gigafactory and improve manufacturing processes at its plant in Fremont, CA.


Tesla has been going through various levels of hell of late: production hell for its troubled Model 3 vehicle, reputational hell after CEO Elon Musk flipped out on an earnings call, and money hell as the company's cash position deteriorates while it struggles to remedy its problems.

The carmaker is also losing executives and seeing others take a leave of absence.

None of this fazed Ron Baron of Baron Capital in a CNBC appearance Monday. Baron is a Tesla bull whose fund holds, by his count, around 1.6 billion shares. Baron bought when the stock was trading just north of $200, so at the current price of about $300, he said he doesn't think he's made much money.

That doesn't mean he thinks he won't make a killing in the future. Baron anticipates a return of 20 times the original investment.

Time will tell if he's right, but for now, he appears confused about what Tesla is spending money on, as it burns cash at record levels and loses massive amounts of money.

Baron doesn't consider the spending a big deal because, according to him, Tesla is building factories and factories aren't cheap.

The problem is that Tesla isn't building factories. 

Tesla has two factories — and that's all

tesla gigafactory

The carmaker has two manufacturing facilities: a plant in Fremont, CA that used to belong to General Motors and Toyota; and its Gigafactory in Nevada. Fremont is decades old. The Gigafactory is in the process of being completed. 

Tesla had been working to develop a highly automated assembly process for its Model 3 at Fremont, but the company has abandoned that plan as production lagged behind targets. Perhaps this is what Baron is thinking about. But the bottom line is that while Tesla might build some new factories in coming years, outside some modest acquisitions the company's manufacturing footprint isn't growing significantly. So that's not where the money is going.

Rather, the money is going into the sluggish Model 3 ramp, which is currently being rescued by an infusion of old-school human labor and a 24/7 manufacturing schedule. 

Baron's investment thesis is that Tesla is a great opportunity for future growth. He could be proved right. But for now, he's wrong about what's costing Tesla billions in cash.

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