Dear Tesla Motors: Losing money with software is one thing, losing it with hardware is another

Reading that Tesla Motors' net loss has more than doubled in the fourth quarter of 2015, brought up an interesting point: losing (investors') money with software is one thing, but losing it with hardware is another.

With revenues now in the billions ($1.21 billion, to be precise), Tesla Motors has to show that it can also earn money with the metal it sells. Even after the recent acquisition of the new production center, New United Motor Manufacturing Inc. (a former joint-venture between Toyota and General Motors), and its capacity to produce 1000 cars a week, Tesla's production volume is still less than 1% of the production volume of German automobile companies.

Simply by economies of scale, software and hardware products are different games.

Companies dominating the list of R&D spenders - like Volkswagen with $17.4 billion just last year and more than 10 million produced cars. Tesla can test things and innovate fast because they have nothing to lose. A Mercedes, Porsche, or even Volkswagen with it's latest CO2 "scandal", has to work 105% of the time just to meet existing customer expectations.

Tesla's innovation is design and brand - and with the spirit of Silicon Valley marketing the electrical drive. Looking into the drawers of engineers in Japan and Germany, there are more superior, more efficient and much cheaper tested concepts. But let's face it: people like to buy gasoline cars - for now, especially at less than $30 per oil barrel.

Electric cars have two central issues: they are not as "clean" as we think and they need fewer people to build them. Both issues are not well regarded by governments. The economies of scale to produce cars are playing against them in a global, saturated automobile market. Tesla's move towards the giga factory is a smart move: the battery market is potentially where Tesla could make significantly more money with hardware, become a world market leader and play a central role in the automotive industry in the future.

Ultimately, it's not just about innovating faster, it's also about becoming profitable. Tesla is not Amazon - because they sell hardware.