With the Model 3 Out of the Bag, Tesla Investors Worry (While Musk Won't Stop Talking About 'Hell')

Steph Willems
by Steph Willems
with the model 3 out of the bag tesla investors worry while musk won t stop talking

The production Tesla Model 3, revealed in full at a Friday evening handover ceremony, is an impressive vehicle, but it’s also the California automaker’s most important vehicle. With 220 miles of range in stripped-down base trim, or 310 miles for the starting sum of $44,ooo (the only version available at launch), the curvaceous sedan has no shortage of fans. It’s also facing no shortage of threats.

The company’s future as a mass-market “disruptor” of the American automotive landscape hinges on the Model 3’s trouble-free production at Tesla’s Fremont assembly plant, as well as timely deliveries to the half-million reservation holders. Unforeseen quality issues, a breakdown in the supply chain, or worker strife could all conspire to give the vehicle — and company — a black eye.

After a year spent giving investors everything they wished for, the company’s once-skyrocketing stock isn’t on the same firm ground as before. The first trading day after the event reflected this. Investors are nervous about a number of things: the model’s easily inflatable price, the company’s extremely lofty production target, and CEO Elon Musk’s repeated mentions of “hell.”

Share prices, which hovered around $346 on Thursday morning, fell off as the big reveal drew near. At Monday’s close, the value of a Tesla share sat just above $323, with early Tuesday trading pushing its value below $320.

“We believe the Model 3 was as good as or better than expected, and pricing was as expected with considerable initial upsell. That said, the rubber now hits the road, and the fundamental questions remain unanswered,” wrote Bernstein analyst Toni Sacconaghi in a message to clients Monday. He added, “CEO Elon Musk sounds increasingly squeamish about the production ramp,” referencing Musk’s message to employees, in which he told them to prepare for “production hell.”

That wasn’t the only mention of the heavy lifting required to reach an output of 5,000 vehicles per week by the end of the year. During Friday’s event, Musk made another mention of employees facing “at least six months of manufacturing hell.”

Also Monday, a group of Tesla workers sent an open letter to the company’s board of directors, seeking safety data and wage transparency. For at least the past year the workers have waged a campaign to unionize the Fremont plant’s workforce — something Musk hopes to avoid.

Outside the factory, Model 3 buyers not currently in the half-million-strong queue face a long wait for their vehicle. Musk claims that, because of the backlog of reservations, new orders won’t be filled until late 2018 at the earliest. Any slowdown at Fremont would push deliveries back even further.

The “upsell” mentioned by Sacconaghi refers to a raft of packages and options capable of inflating the Model 3’s base price of $35,000 (before federal tax credit) to nearly $60,000. Any paint color besides black warrants an extra $1,000, while tech and luxury items add thousands more.

On Saturday, following the Model 3’s production debut, Musk tweeted a response to a Tesla aficionado’s question about a high-performance Model 3. A quicker Model 3 (Long Range variants hit 60 mph in 5.1 seconds), will probably arrive in the middle of next year, Musk said.

“Focus now is on getting out of Model 3 production hell,” he tweeted. “More versions = deeper in hell.”

The same Saturday exchange saw the CEO speak candidly about his mental health, describing in one tweet his “unrelenting stress.” In another, Musk claimed to suffer from bipolar disorder, adding, “Maybe not medically tho. Dunno.” He went on to suggest his mood swings could be organic reactions to real events, summing up his situation at Tesla by stating, “If you buy a ticket to hell, it isn’t fair to blame hell…”

[Sources: CNBC, Marketwatch] [Image: Tesla]

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6 of 63 comments
  • Derekson Derekson on Aug 01, 2017

    I'm sure Tesla's workforce that is already complaining about working conditions and working to unionize is ready to weather "production hell".

  • SCE to AUX SCE to AUX on Aug 01, 2017

    "Unforeseen quality issues, a breakdown in the supply chain, or worker strife could all conspire to give the vehicle — and company — a black eye." This is true for any mfr, but Tesla would feel it more acutely. All the 'hell' talk has me wondering what's going on inside the plant. I suspect the production line is held together with bailing wire and duct tape - figuratively, of course. - Perhaps the assembly instructions and training aren't yet complete. - Perhaps the parts aren't fitting together right due to design, documentation, or supplier quality issues. - Perhaps the automated equipment isn't quite fine-tuned yet. - Perhaps they've already identified hundreds of revisions which need to be made, but can't flush them all through their system fast enough. - Perhaps the final Cost of Goods Sold is higher than projected, and they're already trying to find ways to cut costs. So I'd consider an early Model 3 to be a decent car, but it won't be the same car (at the detail level) that they'll be shipping in 6 months. So I'm glad I have to wait a while.

    • See 3 previous
    • Mcs Mcs on Aug 02, 2017

      @JimZ I usually consider every manufacturer's first year a beta test. I admit I might be wrong, but that's my perception.

  • Alan The Prado shouldn't have the Landcruiser name attached. It isn't a Landcruiser as much as a Tacoma or 4 Runner or a FJ Cruiser. Toyota have used the Landcruiser name as a marketing exercise for years. In Australia the RAV4 even had Landcruiser attached years ago! The Toyota Landcruiser is the Landcruiser, not a tarted up Tacoma wagon.Here a GX Prado cost about $61k before on roads, this is about $41k USD. This is a 2.8 diesel 4x4 with all the off road tricky stuff, plus AC, power windows, etc. I'm wondering if Toyota will perform the Nissan Armada treatment on it and debase the Prado. The Patrol here is actually as capable and possibly more capable than the Landcruiser off road (according to some reviews). The Armada was 'muricanised and the off road ability was reduced a lot. Who ever heard of a 2 wheel drive Patrol.Does the US need the Prado? Why not. Another option to choose from built by Toyota that is overpriced and uses old tech.My sister had a Prado Grande, I didn't think much of it. It was narrow inside and not that comfortable. Her Grand Cherokee was more comfortable and now her Toureg is even more comfortable, but you can still feel the road in the seat of your pants and ears.
  • Jeffrey No tis vehicle doen't need to come to America. The market if flooded in this segment what we need are fun affordable vehicles.
  • Nrd515 I don't really see the point of annual inspections, especially when the car is under 3 years (warranty) old. Inspections should be safety related, ONLY, none of the nonsensical CA ARB rules that end up being something like, "Your air intake doesn't have an ARB sticker on it, so you have to remove it and buy one just like it that does have the ARB sticker on it!". If the car or whatever isn't puking smoke out of it, and it doesn't make your eyes water, like an old Chevy Bel-Air I was behind on Wed did, it's fine. I was stuck in traffic behind that old car, and wow, the gasoline smell was super potent. It was in nice shape, but man, it was choking me. I was amused by the 80 something old guy driving it, he even had a hat with a feather in it, THE sign of someone you don't want to be driving anywhere near you.
  • Lou_BC "15mpg EPA" The 2023 ZR2 Colorado is supposed to be 16 mpg
  • ToolGuy "The more aerodynamic, organic shape of the Mark VIII meant ride height was slightly lower than before at 53.6 inches, over 54.2” for the Mark VII."• I am not sure that ride height means what you think it means.Elaboration: There is some possible disagreement about what "ride height" refers to. Some say ground clearance, some say H point (without calling it that), some say something else. But none of those people would use a number of over 4 feet for a stock Mark anything.Then you go on to use it correctly ("A notable advancement in the Mark VIII’s suspension was programming to lower the ride height slightly at high speeds, which assisted fuel economy via improved aerodynamics.") so what do I know. Plus, I ended a sentence with a preposition. 🙂