Tesla (NASDAQ:TSLA) has changed the world. We wouldn’t be so far along toward electric cars, self-driving cars, solar energy, space exploration or efficient subway tunneling without Elon Musk and his efforts to hide the problem I identified here almost two years ago.

I called it the boring story you shouldn’t ignore — the problem of scaling auto production. Tesla stock’s price was based on its ability to produce 500,000 cars this year.

That’s 10,000 cars each week, but Tesla now demands praise for making 5,000 in June.

Nothing else is as relevant to the company’s investment case as its success in scaling car production. Everything else is smoke and mirrors.

But what smoke, and what mirrors! Tesla opened for trading June 19 at about $365-per-share, a market cap of nearly $63 billion, against $62 billion for General Motors (NYSE:GM).

Hope Over Experience

Tesla had $3.4 billion of revenue for the March quarter, and $11.6 billion for all of 2017, so investors are paying nearly six times revenue to own the stock that, while it had 50% top-line growth last year, is unlikely to get half that this year and has yet to make a profit.

Tesla continues to use the popularity of its stock to raise debt and had $8.8 billion in long-term debt on $27.2 billion in assets at the end of March. GM, by contrast, had $11.8 billion in long-term debt on $218.7 billion in assets.

Then again, GM knows how to make cars. It expects to have sold 200,000 electric vehicles by the end of 2018. Tesla just produced its 300,000^th car total. 

What’s keeping Tesla stock riding high are hope and hype. CEO and founder Elon Musk continues to make headlines for units of his empire that Tesla doesn’t own, like The Boring Co. and SpaceX. He continues to churn through production executives, and workers, recently laying off 10% of his workforce in a bid toward profitability.

He also fights hard against any news that might contradict his stories of progress, muzzling the workers he let go and, reportedly, not accurately reporting injuries on his factory floor.

Cut through all the double talk of Tesla suppliers and one point is clear: Tesla’s original dream, a factory fully staffed by robots, did not work. 

What’s Left of Tesla

Tesla has been able to scale production of things that are simpler to make than cars.

Tesla had $410 million in revenue from batteries and solar panels during the first quarter, up 38% for the quarter and double the totals of the previous year. It achieved gross margins of 8.5% on that business.

The problem is that auto revenue for the quarter was $2.7 billion, up just 1% from the previous quarter, and the gross margins on that business were 19.7%.

The Bottom Line

When it next reports earnings, on Aug. 1, Tesla is expected to deliver another loss, $3.61-per-share or about $600 million, on revenue of $3.96 billion. Growth is slowing. Losses are not slowing.

So long as the general market remains sky high, this may be enough to keep investors who have made good money on Tesla stock in the shares. But as the President continues to defy the world with trade wars, the chances of a general stock market tumble increases.

If that happens, you’ll find Tesla stock in the wreckage. When investors start demanding recession proof results, hope and hype won’t be good enough.

Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he did not hold a position in any of the aforementioned securities.