By on July 18, 2012

Brokerage Wunderlich Securities downgraded Tesla to “sell” from “buy.” The reason: Tesla has downshifted its production plans, reports Reuters.

“While initially saying that it would produce and sell 1,000 cars in the third quarter, Tesla now says it will certainly be 500 cars,” Wunderlich analyst, Theodore O’Neill, said in a research note.

Tesla said that it plans to deliver 5,000 Model S cars by year end.

“While the company is sticking to its 5,000 unit forecast for 2012, how it gets there becomes a second issue for it to resolve,” says a diplomatic O’Neill.

Reservations for the electric car are said to be more than 10,000.

Note: “Sell” recommendations are not frequently given, usually they are couched in “hold” or “accumulate.”


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45 Comments on “Tesla Slashes Model S Output...”

  • avatar

    If Tesla goes down, this is going to make me look absolutely prescient (from my comments on Engadget).

    They’ve never made money. They owe money all over town, including to known pornographers! She kidnapped herself!

  • avatar

    Elon, you’re being very un-Dude

  • avatar

    Shut up and act, Leo.

  • avatar

    Wow. Hold is usually investment speech for, “we’ve already divested all of our important customers’ portfolios of this toilet paper.”

  • avatar

    Wrong direction, to be sure, but Tesla will be all right.

  • avatar

    Tesla deathwatch?

    I’m not shocked. The $57K version of the S remains “vaporware” at this time as only Signature S models and above are shipping.

    The big red glaring flag should have been when they started dipping into deposits on future vehicles to build current orders. In other words I’ll spend customer C, D and E’s money building customer’s A car and the profit I make will let me build B. But I’ll have to pull from customer F, G, H to do it. Which then lets me build C, but now I have to make up the deposit I already spent, so now I have to pull from customer I, J, K, and L, to build C.

    I’m sure in a couple of years Toyota will happily buy up the patent portfolio for pennies on the dollar.

    Elon has the right idea – electric cars are a good idea. He’s about 5 to 10 years too far ahead to market.

    And, “oh they’ll drop the price point and the problem is solved,” isn’t going to answer the question. Lower priced point EVs aren’t selling either.

    • 0 avatar

      Don’t they call this a Ponzi scheme?

    • 0 avatar

      Only on TTAC can we regularly read about option-packages criticized as “vaporware.”

      I’m going to make a blind stab at a vaporware pattern here:

      “TESLA is Vaporware!” -> (Tesla produces the roadster) ->
      “The MODEL S is Vaporware!” -> (Tesla produces the Model S) ->
      “The BASE Model S is Vaporware!” -> (Tesla produces the base Model S)
      “The base Model S in ROYAL BLUE WITH TAN LEATHER is Vaporware! -> (Tesla produces…)

      What I’d really like to see? A Model S with the license plate “VAPRWARE” Now that would be hilarious.

      • 0 avatar

        Well said, Thinkin…

        It didn’t take long for the ‘vaporware’ crowd to tune in.

      • 0 avatar

        What’s really vaporware?

        Tesla making money.

        (*If* APaGttH is correct and they’re using deposits to make current cars, they’re deeply screwed, no?

        [I say if because I haven’t checked and wouldn’t know.]

        I wouldn’t hold my breath on a less-profitable base model appearing *if* they’re having to cannibalize future-car deposits to make what’s shipping NOW.

        Contra Darkhorse, it’s only a pyramid scheme if that was the original intent and business plan, which clearly was not the case; if they’re just failing and desperately using all the cash on hand to fill orders, despite intent to make a profit, that’s another matter.

        That’s just everyday business failure.)

      • 0 avatar


        My source on Tesla using deposits to fund their operations?

        The Truth About Cars…

        In some states, this kind of accounting is illegal (it is in my state)

    • 0 avatar

      Five to ten years ahead of it’s time and in the slough of the biggest financial down turn since the Great Depression.

    • 0 avatar

      @APaGttH: The deposit is fully refundable, and the vast majority of us that have put down reservation money know the score. If Tesla goes bust, we lose our money. However, we are in a real sense helping create the future of vehicles by supporting this project. $5000 is a small price to pay for that, and in exchange, we’ll be the first to get the car. I’ve driven it, and it is a dream car. It won’t be for everyone, but I can’t wait to get mine in October.

      “Lower priced point EVs aren’t selling either.” Because they are mostly terrible. 2015 Tesla Gen III @ base $30k will sell plenty. And in the meantime, Tesla has more orders than they can fill for Model S, even at the higher price point. You’re making the mistake of comparing this car against a Volt or a Leaf, when you should be comparing it against a BMW or Mercedes. Tesla needs to sell around 20k vehicles into that performance luxury segment, and that a fairly small number, especially when you look at the global market. After driving the car, I have no doubt that they’ll hit it. None.

  • avatar

    I certainly put 100% faith in whatever any analysts says, because i can then believe absolutely ANYTHING

  • avatar

    “downgraded Tesla to “sell” from “buy.””

    Unless you’re trying to make a funny point, you might want to fix that.

    • 0 avatar
      el scotto

      That would be unintended irony if read incorrectly.

    • 0 avatar

      I don’t completely understand the stock market, but couldn’t that mean Tesla’s stock is at a low point so buy it on the cheap now, so you can sell when it goes up again?

      • 0 avatar

        A sell rating means the stock is overpriced and will fall in value. In the case of Tesla, BWS values it at $28 and the market price is currently close to $33. When the price has fallen to $28, the stock will be rated as a hold unless additional financial or market information changes its valuation.

      • 0 avatar

        I haven’t seen the analyst report, but it’s interesting that I thought when reading the above article that Tesla would be attractive in the mid-20s, and then I saw it was still pretty high at 32. So the analyst is pretty close to my own feelings about the company, and as you can tell from my posting history, I’m a major defender of it overall.

        I think it’s reasonable to say that if you have a company with pre-orders of 10,000 units, with $5,000 deposits, the company is likely to continue in business for some time unless it’s very poorly managed.

        It might be noted that it’s very sensible for Tesla to use those deposits to start building cars, because revenue is immediate after the car is assembled. So if we have 10,000 deposits of $5,000 each, that’s $50 million. Let’s say we can build a Tesla Model S for about $50k and the rest of the price is profit. For $50m you can build 1000 units, which are worth $80m at retail. You take the 80m, build the next 1000 units and pocket the remaining $30m as profit, and then the company will keep on cycling through that money to build the rest of the cars. That sounds like a perfectly feasible plan.

        Tesla stated upon delivery of the first 10 vehicles that they were going to be making a single car a day for a while. This was well known and heavily reported in the media. The current announcement is only a delay. Considering Tesla’s track record with the Roadster, no reasonably intelligent person is going to order a Tesla and expect it delivered within any kind of precise time frame. If I had $80,000 and ordered one today, I would expect it in a year. Or a year and a half. Or two years. I would certainly not get rid of my present car until I took physical delivery of the new one!

        I think it’s fair to repeat the fundamentals of the company, none of which have changed:

        * Tesla owners, by all reports, love their cars.
        * The company has over 10,000 preorders, which is highly unusual for any automaker.
        * The car has a highly unique value proposition – running costs are far lower than any other luxury car and significantly lower even than the typical gas-powered econobox.
        * The car is expensive but comparable in price to the competition with similar performance.
        * I think there is a significant number of people, many of who have real money to plunk down, who really want this company and car line to succeed. Like Apple, people have an emotional stake in Tesla.

        So if the stock does drop to the mid 20s or so I think it would be a buy. Right now, though, I’m staying away since I think investor cynicism is going to build before better news comes from the company.


      • 0 avatar

        @David Dennis

        Nissan had deposits on over 20,000 Versas – less than 40% of them actually turned into orders.

        A $5,000 deposit isn’t chump change, but its not even 10% down on a base Model S (remember, you still pay $57,000 – the ‘guberment gives you the $7,500 as a tax credit later).

        If you’re looking at a loaded out $89K or $100K+ version of the S – $5K is chump change.

    • 0 avatar

      The to … from … thing is the new and completely unintuitive thing they’re doing on the east coast. Normal people go from something to something. But they’ve decided to reverse it for no reason at all. My newest pet peeve.

      • 0 avatar

        Crap, you’r right.

        I just noticed I’m the one who missed it.


      • 0 avatar

        The New York Times Manual of Style and Usage prescribes the odd-sounding “to… from” construction in some circumstances to avoid confusion when discussing numerical quantities. At a glance, “from… to” suggests a range of values rather than a change from one discrete value to another.

  • avatar
    Volt 230

    We lost Pontiac, we lost Dusenberg, we lost Packard and Oldsmobile who gives a crap about this toy maker?

    • 0 avatar

      I do. Given the incredibly high hurdles to start and successfully run a car company, Tesla is a glimpse of the American dream.

      If Elon Musk – who has put SpaceX spacecraft into orbit, docking with the International Space Station – can’t succeed with Tesla, then we are doomed to be stuck with the Big 3 forever. And an individual’s hopes of starting a small business become that much more remote.

      We don’t need a flood of wannabe carmakers as in the 1920s, but to see a new one succeed would be nice, even if you hate EVs.

      • 0 avatar

        It would be nice – but one failure doesn’t kill the hope of small businesses. (After all, carmaking? Is *not* a small business!)

        Nor does it follow that Musk’s notional failure means “big 3 forever” any more than “big 3 forever” was true before Tesla.

        Elon Musk is not magic.

        All a possible Tesla failure would be is a reminder that having money and smarts in one area doesn’t mean you can make a car that people want at a profitable price.

        (SpaceX? Nothing to do with Tesla being a market success. The competition in the space access market is, shall we say, rather different?)

  • avatar

    This still remains to be the only electric car I would consider purchasing. It’s not perfect in many ways however it looks good, has good performance and has decent range. I wish I had the 60k to give one a try.

  • avatar

    Torpedoed like a Tucker.

  • avatar

    Tesla…see ya later? I hope not, for we need to develop this technology to create a credible alternative to the Leafs, Prius’ and Volts.

    I applaud those efforts, but Tesla really seems to on the cusp of something and I’d hate to see it go away.

    Where, exactly, is that “50 mpg carburetor” we used to hear so much about? Oh, wait – that was 40 years ago! My mistake.

  • avatar

    from Wikipedia:

    “Tucker’s 1948 Sedan’s revolutionary ideas in car safety helped formulate car safety standards.”

    therefore, all is not lost…save honor, unless the Italian to English translation for Carlo Pietro Giovanni Guglielmo Tebaldo is Elon.

    • 0 avatar

      Was that at all true though? Tucker’s idea of safety consisted of a dashboard you could hide under in a crash.

      • 0 avatar

        all wheel disc brakes, pop out windshield, and a steel safety bulkhead that surrounded the luggage compartment located under the hood, thus shielding the passenger compartment from head-on collisions. in addition to regular headlights, the Tucker had a center Cyclops eye, which turned with the front wheels. the Cyclops beam was around the corner before the driver’s vision, lighting the way ahead.

      • 0 avatar

        No Tucker 48 actually built was fitted with disc brakes or seat belts. Much of the ‘safety’ that made it to semi-production was of the carny variety.

  • avatar

    I downgrade Brokerage Wunderlich Securities from “sell” to “crap”. A bunch of captain obvious “analysts”. “Clouds are covering the skies…. it may start to rain, you know??” grade of advisors.

    Tesla? Wishing them the best, really. But nearly all the odds are against them. The “buy” rating? Only when you count on some acquisition by some large car maker.

  • avatar

    Billy had an idea for a machine into which you put a coin and pulled a knob releasing the product. couldn’t get funding during the Depression. similar to how he saw the self selling elliptical road cart, valve in head and electric icebox. some ideas made it into production, some didn’t. remember Ford only took cash, Billy took payments…

  • avatar

    Your headline says “Tesla Slashes Model S Output.”

    But where did you get that fact? All you have is the speculation of an analyst: “While the company is sticking to its 5,000 unit forecast for 2012, how it gets there becomes a second issue for it to resolve,”

    They’re sticking to their forecast; this particular analyst just doesn’t BELIEVE them. Not the same as the company reporting a drop in future production.

    • 0 avatar

      From the article: “While initially saying that it would produce and sell 1,000 cars in the third quarter, Tesla now says it will certainly be 500 cars”. That would seem to indicate that Tesla was source of the information. That’s slashing their production in half for the entire 3rd quarter.

      • 0 avatar

        @acarr260: Actually, I don’t believe Tesla ever said they would produce 1000 cars in Q3 (if you can find a quote, I’d like to see it). In fact, trying to retrofit a ramp-up production curve to 5k vehicles in 2012 has been a bit of a game for enthusiasts and analysts alike. The reality is, if Tesla hits 5k vehicles by the end of the year, they will meet their public commitment (and prove a whole lot of doubters wrong). Given the current ramp, it looks like it will be a very busy Thanksgiving and Christmas in Fremont this year. But it won’t be for naught: 5000 vehicles x ASP $75000 = $375 million in revenue. I for one believe Santa Elon and his Tesla elves will deliver.

  • avatar

    Since when is it bad for demand to outpace supply? Tesla overestimated their ability to ramp up production, but the product itself seems to be rather good. I think Elon Musk knows a thing or two about business. He’s not a shyster.

  • avatar

    Circling the drain for good reason. Daring is one thing; stupid is another. Hint: Be the Henry Ford of electric cars, not the John Delorean.

  • avatar

    What Tesla needs to build in the VW Type 1 of EVs and sell it for under $20,000.

  • avatar

    Sorry to break it to ya TTACs “best and brightest” but Tesla is here to stay. Their Toyota technology sharing contract keeps them in the drivers seat for years to come. I wonder if Musk is intentionally limiting the supply in order to keep demand high and thus his price premium (think Harley Davidson.) He’s a bright guy this Elon ;-}

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