Tesla Shares Slip as Elon Musk's Reassurances Fall Flat
It’s now Tesla that’s been disrupted.
For all of the Silicon Valley speak about “disrupting” the automotive industry, and despite some very interesting successes in doing just that, Tesla is still struggling to actually get cars to market.
That’s understandable to an extent – the company is small, with limited experience. But CEO Elon Musk has talked a big game, and thus far not delivered on his promises.
Wall Street, predictably, has noticed.
Tesla sent a letter to investors today stating it expects to reach its goal of 5,000 units of the new Model 3 per week by the end of the first quarter of 2018. That’s in contrast to the previous timeline, which placed the goal at the end of 2017.
Tesla also lost $619.4 million this quarter. That obviously doesn’t help its standing with investors.
Musk attributed production delays to difficulties in building battery packs at the Gigafactory in Nevada and to slowdowns with certain tasks, notably in welding and final assembly, at its Fremont, California factory. Musk reportedly also blamed suppliers for some problems. We’ve reported that there may be other problems, as well, and a rash of firings/layoffs recently has likely not helped.
Musk, of course, tried to calm investors by saying the problems are typical of any effort to bring a new vehicle to market.
In the eyes of investors, it doesn’t matter whether he’s right or wrong, what matters is promises kept. So it shouldn’t come as a shock that shares slipped 4.6 percent in extended Wednesday trading after the letter was released. They fell to under $308 per, which is down 20 percent from the peak reached at the midpoint of this year.
To be fair, that’s still a lot of money per share. No one is writing Tesla off. But between the company’s successes, Musk’s bluster, and a cadre of loyalists, the share price shot up based on expectations, and those expectations weren’t met.
“While we continue to make significant progress each week in fixing Model 3 bottlenecks, the nature of manufacturing challenges during a ramp such as this makes it difficult to predict exactly how long it will take,” Musk wrote in the letter. “The Model 3 production process will be vastly more automated than the production process of Model S, Model X or almost any other car on the market. Bringing this level of automation online is simply challenging.”
Again, it’s not unexpected that Tesla would run into problems getting its first-ever mass-market vehicle launched. Even the experienced so-called “legacy” automakers run into trouble from time to time, and Tesla is still new to the industry.
So combine standard-issue troubles with big talk and you have a recipe for sliding stock. It doesn’t help that of the 1,500 Model 3s Tesla aimed to build in the third quarter, just 260 were produced.
Only time will tell if Tesla gets rolling smoothly or continues to struggle, but the market appears to have corrected.
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- ToolGuy CXXVIII comments?!?
- ToolGuy I did truck things with my truck this past week, twenty-odd miles from home (farther than usual). Recall that the interior bed space of my (modified) truck is 98" x 74". On the ride home yesterday the bed carried a 20 foot extension ladder (10 feet long, flagged 14 inches past the rear bumper), two other ladders, a smallish air compressor, a largish shop vac, three large bins, some materials, some scrap, and a slew of tool cases/bags. It was pretty full, is what I'm saying.The range of the Cybertruck would have been just fine. Nothing I carried had any substantial weight to it, in truck terms. The frunk would have been extremely useful (lock the tool cases there, out of the way of the Bed Stuff, away from prying eyes and grasping fingers -- you say I can charge my cordless tools there? bonus). Stainless steel plus no paint is a plus.Apparently the Cybertruck bed will be 78" long (but over 96" with the tailgate folded down) and 60-65" wide. And then Tesla promises "100 cubic feet of exterior, lockable storage — including the under-bed, frunk and sail pillars." Underbed storage requires the bed to be clear of other stuff, but bottom line everything would have fit, especially when we consider the second row of seats (tools and some materials out of the weather).Some days I was hauling mostly air on one leg of the trip. There were several store runs involved, some for 8-foot stock. One day I bummed a ride in a Roush Mustang. Three separate times other drivers tried to run into my truck (stainless steel panels, yes please). The fuel savings would be large enough for me to notice and to care.TL;DR: This truck would work for me, as a truck. Sample size = 1.
- Art Vandelay Dodge should bring this back. They could sell it as the classic classic classic model
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- ToolGuy Is it a genuine Top Hand? Oh, I forgot, I don't care. 🙂
How good is the Tesla Model 3 in the Moose Avoidance test?
Musk now saying no Chinese factory for at least 3 years. So they won't be to 20K cars a month until April 2018 at the earliest. There is no way, no how, they will get to 500K cars a year at Freemont, or even close to it. It doesn't even seem they will be to 250K cars a year by the start of 2019.