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

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]