By on November 2, 2017

Tesla Model 3, Image: Tesla

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.

[Image: Tesla]

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25 Comments on “Tesla Shares Slip as Elon Musk’s Reassurances Fall Flat...”


  • avatar
    hirostates12

    Hurry-up engineering on an expensive consumer product is news.

    The momentary fluctuations of stock value as determined by hedge fund villains and computer algorithms are not news.

    The stock market has minimal ability to predict long term value. See the history of Apple stock price as a stark example.

  • avatar
    Kendahl

    During the dot.com bubble of the 1990s, I knew a guy who made a lot of money with America Online. He told me he regularly took out his profits and put the money into Walmart so that he could sleep at night. That’s good advice for Tesla investors, too.

  • avatar
    pwrwrench

    Another ‘Pump and Dump’.

  • avatar
    EBFlex

    “Musk, of course, tried to calm investors by saying the problems are typical of any effort to bring a new vehicle to market.”

    No, you con artist. Nothing about what you are doing is “typical of any effort to bring a new vehicle to market”.

    You simply have no clue what you are doing and its blatantly obvious. You and your company are failures.

    • 0 avatar
      IHateCars

      Lol….and yet he’s worth billions and you’re bitching on a car blog. #winning!

      • 0 avatar

        As if monetary success were the most important thing in life.

        The question becomes…will he be able to hold onto his fortune if Tesla crashes and burns – as many have suggested?

        Flex’s comment is absolutely appropriate, even though I don’t think of him as a con man as much as I think that’s he’s naive and too inclined to believe his own press.

      • 0 avatar
        EBFlex

        “Lol….and yet he’s worth billions and you’re bitching on a car blog. #winning!”

        Right. Scam artists generally are worth more than they should be. Bernie Madoff was almost worth a billion, now hes rotting in jail.

  • avatar
    markf

    “I don’t think of him as a con man as much as I think that’s he’s naive and too inclined to believe his own press.”

    Agree, I don’t think he is a con man, he does (sporadically) have a product to offer. I do think he is full of s**t and absolutely knew he could never meet the Model 3 production goals.

    What I find most interesting is his customers and admirers slavish devotion/believe in every word that comes out of his mouth. This mentality explains the stock prices though.

    Something that can’t go on forever won’t, we’ll see if Tesla goes on……

    • 0 avatar
      Big Al from Oz

      I disagree.

      Musk is a con. If he wasn’t a conman why does he consistently overstate and overreach with his statements regarding his businesses?

      Some will say he’s protecting his interests, but how far can you push “protection of interests” before it becomes conniving? Lying is a better word. Lying and he knows he’s lying to earn money is what a con does.

      He makes statements with intent and never achieves goals.

      As his aspirations grow so does his failed promises. He is also showing as Tesla becomes stressed or more correctly Musk becomes stressed he is making poor judgment, ie, sacking key people, knowingly making decisions that can’t be meet.

      • 0 avatar
        markf

        “If he wasn’t a conman why does he consistently overstate and overreach with his statements regarding his businesses?”

        I think because he knows he can get away with it. People who ought to know better refuse to seethe truth, his stock goes up and up and he keeps blathering on because no one will challenge him. Look at his core market for TESLA, rich, old white men. Who runs the market? Of course they want to believe his BS

      • 0 avatar
        el scotto

        Those responsible for the sacking have been sacked.

  • avatar
    Big Al from Oz

    As is mentioned Musk is pushing out production. By the end of the first quarter in 2018, will he push it out another quarter?

    He is not bringing new tech to the factory floor with robotics. Also, why is Tesla having such a hard time with robotics? Isn’t Tesla the end all and be all with autonomous vehicles? Musk should have the worlds best in robotics at his fingertips.

    I sense Musk is playing a game that will cost billions.

    • 0 avatar
      Lorenzo

      As any programmer will tell you, robotics are a hardware problem. For that, you don’t need programmers, you need engineers experienced building and maintaining an auto assembly line.

      The Fremont plant used to crank out cars (Chevy Chevelles and Pontiac LeMans) the old fashioned way, at about 1,000 a day. As a NUMMI plant cranking out GM and Toyota models the NEW way, it produced 6,000 vehicles a week.

      All that equipment was removed, and Tesla started from scratch, building most of its cars by hand. Musk doesn’t know how to run auto assembly, and neither do enough of the people in the plant. It’s that simple.

    • 0 avatar
      Lorenzo

      BTW – over 10% of Model 3 orders have been cancelled. That’s 63,000 fewer cars needed to be built. Unfortunately, people cancelling their orders are experiencing delays in getting their $1,000 deposit back. The fact Tesla burned through over $1 billion in the last quarter might have something to do with that.

      • 0 avatar
        Big Al from Oz

        Lorenzo,
        That’s still short $937 million after you deduct the 10%, if he’s paid it all out.

        I understand the issue at the factory. But I do believe Musk has had the time and opportunity to make it all work. Musk still has a lot of highly intelligent people who would of advised him on how to proceed in setting up the plant.

        It’s not all that new what’s he’s doing.

        The problem is Musk didn’t invest his resources (not just money) effectively into his business. I wonder how well thought out are his other business concerns?

        This to me is poor judgment.

  • avatar
    volvo

    Just the current numbers make TSLA hard to recommend as a current buy without a lot of hope that net earnings will appear in a reasonable time frame.

    Rounded numbers from today are.

    2017 PE estimate negative $34
    2018 PE estimate negative $412

    Current earnings per share negative $4.85

    Also interesting is:

    Net income/employee and Revenue/employee much much worse that others in the Automotive sector

  • avatar
    Master Baiter

    Musk is trying to follow the Jeff Bezos model of success:

    1. Promise the world, keep scaling up, lose money for years. Wall Street rewards with high stock price.

    2. After 20 years of losing money, earn a few billion dollars. Stock PE ratio approaches 300.

    3. Become richest man in the world from over-priced stock.

    I used to bash Amazon and Bezos, while if I had invested big in Amazon years ago, I could retire now.

  • avatar
    carguy67

    In hindsight, maybe Musk should have taken SpaceX public and kept TSLA private (landing a rocket on its tail is a pretty good trick).

  • avatar
    don1967

    Pay no attention to that man behind the curtain. Somebody has to take the loss when Tesla goes down in its spectacular, inevitable fireball.

  • avatar
    el scotto

    How good is the Tesla Model 3 in the Moose Avoidance test?

  • avatar
    APaGttH

    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.

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