No more is Tesla likely to lose money and yet see its stock price soar because, well, that’s one sign of a successful tech company. Tesla lost a record $ 671 million om the quarter, the company reported Wednesday, and produced just 260 units of the Model 3 over those three months from July to September.
The company has lost nearly a quarter of its total market value since mid-September. Some analysts say they aren’t getting clear answers from CEO Elon Musk and they’re less inclined to believe Tesla promises, for instance that production of 5,000 Model 3s per week this quarter can now be expected in the first quarter of 2018. Tesla admits there are problems at its battery factory; others wonder if there are issues on the main production line.
Tesla stock price since going public at $ 17 per share June 29, 2010. This summer it was worth 23X the initial investment. (Source: Yahoo/Edgar)
Promises and Restated Promises
Tesla’s 2017 Q4 goal is now its 2018 Q1 plan.
The $ 35,000 (base price) Tesla Model 3 sedan is Tesla’s mass market car. Some 400,000 people put down $ 1,000 deposits.
Tesla’s goal was to be producing Model 3s in significant quantity this year. In July, Musk tweeted Tesla expected to build more than 1,500 Model 3s in August and September and in an August newsletter to shareholders, Tesla reiterated, “We are confident we can produce just over 1,500 vehicles in Q3.” Tesla met 17 percent of that goal, shipping just 260. A chart still on Tesla’s site today (Nov. 3) showed the 5,000 units-per-week production by year’s end. The August letter also said Tesla will be “increasing Model 3 production to 10,000 vehicles per week at some point in 2018.”
Some analysts say they don’t see Tesla hitting 5,000 cars per week until sometime in Q2 (April to June 2018). That calls into question Tesla’s goal of building nearly 300,000 Model 3’s in 2018; it could be more like 250,000.
Tesla stock prices last 3 months: off 23% vs. the September peak. (Source: Yahoo)
It’s the Production Line, Not the Car
The Tesla Model S, its luxury sedan, suffered from reliability issues in its early years. Consumer Reports expects the 2018 Model S will be better than average; 2016 and 2017 models were rated average. The Model X crossover/wagon has been plagued with problems on its falcon-wing doors. Buyers of both have complained about long waits for crash repair parts. Tesla has been talking about strong sales of the Models S and X, but it has also cut production, causing confusion about how well the cars are doing.
As for the Model 3, Tesla says the delay results from problems at the battery production Gigafactory in Nevada, which is a joint venture with Panasonic. Musk actually did his conference call with analysts from the factory and said he’d been sleeping there as well, recently. “To date, our primary production constraint has been in the battery module assembly line at Gigafactory 1, where cells are packaged into modules,” Tesla said. Four of the battery cell modules make up the battery pack.
Some analysts question whether there may also be issues with the main Tesla factory–the production line in Fremont, California–that could also be a bottleneck if and when the battery issues are straightened out. A production line is a delicate ballet of just-in-time deliveries, moving parts to the line, welding machines, robotic arms, and humans putting it all together. Tesla last month fired several hundred employees on account of, Tesla says, poor performance reviews. (Some of the employees disputed the performance-review part.) Just before taking analyst questions Wednesday, Musk went on an extended riff or rant, take your pick, about journalists lacking integrity. According to a transcription provided by Seeking Alpha, Musk said:
The other thing I want to mention, there are a lot of articles about Tesla firing employees and layoffs, these are really ridiculous. And any journalist who has written articles to this effect should be ashamed of themselves for lack of journalistic integrity. Every company in the world, there’s annual performance reviews. In our annual performance review, despite Tesla having an extremely high standard, a standard far higher than other car companies, which we need to have in order to survive against much larger car companies; you can’t be a little guy and have equal levels of skill as the big guy.
Meanwhile, other automakers are improving quality every year, including on US-built vehicles. As the Tesla Model 3 trickles out, Chevrolet continues to crank out the Bolt EV–a record 2,781 units in October, 17,083 for the year and along with sales last December, 17,662 so far in Bolt’s history. That’s not much compared with Tesla’s Model 3 plans, but it dwarfs the couple thousand Model 3s Tesla will ship this year.
The Bolt EV is comparable in range to the base Model 3, 238 miles (rated), and a bit smaller. Reviewers are split between calling the Bolt EV plain and those seeing it as utilitarian-sort-of-cute. It is currently the only significant challenger in 2018 to the Model S in terms of range. The 2018 Nissan Leaf gets a battery upgrade, but only to 150 miles; a redesigned Leaf should hit 200-plus in 2019, as should other automakers. In fact, virtually every automaker will have a 200-mile EV by 2020. Tesla’s window of exclusivity may be closing.
Keep the Faith
Tesla’s Musk said there have been very few people stepping back from the waiting line and asking for their $ 1,000 deposits back. That makes sense. Having $ 1,000 tied up isn’t a severe hardship in this portion of the market and Tesla the company has been able to bond with many of its buyers and want-to-be buyers.
How investors and their advisors feel is another matter. It has been a rocky summer and early fall. Tesla has had tough periods that led to even higher valuations for those who stayed ab0ard. Tesla went public June 29, 2010 at $ 17 per share, hit $ 100 in May 2013, $ 200 in May 2014, and $ 300 in April 2017. Shares peaked at an all-time of $ 389.61 Sept. 17, 2017, fell to $ 321.08 the day before the earnings report, then closed at $ 299.26 Thursday and was likely to end the week around $ 300, clawing back six-plus months of gains.
Even if Tesla buyers believe Elon Musk has a magical touch and they keep the faith, it appears the analysts covering Tesla may not continue to be as deferential. Some are talking about a coming cash crunch. Some in their reports to clients talked about wishing for more transparency from Tesla and its executives. And some may be put off by Musk’s riffs on allegedly low-integrity journalists trying to make Tesla look bad.
Shania Twain could almost be singing to Tesla’s maestro: Okay, so you’ve got a car | That don’t impress me much | So you got the moves but have you got the touch?
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