Tesla Rocked By Model 3 Production Problem.
Some Investors Say Tesla Must Show Its Production Competence.
Others See Just A Hiccup Before Ultimate Triumph.
Tesla Inc’s stock price is on the slide as rosy expectations of an all-electric car world rub up against the cold reality of making the things.
Tesla announced in early October it was having difficulties reaching production targets for the new, mass market Model 3, and its goal for the 3rd quarter of 1,500 cars fell short by more than 80 per cent. Tesla also delayed the unveiling of a new electric truck to November.
The Wall Street Journal’s Heard on the Street columnist Charley Grant referred to CEO Elon Musk’s poor record of delivering on ambitious targets and pointed out that in May 2016, Musk forecast Tesla would make between 100,000 and 200,000 Model 3s in the second half of 2017.
“Investors have bid Tesla (stock price) to a nearly $60 billion equity valuation on expectations the company will dominate the automobile market. That will be fantasy if Tesla can’t produce enough cars profitably,” Grant said.
Morgan Stanley analyst Adam Jonas, long a supporter of investing in Tesla, wasn’t fazed by what he called the “Model 3 Ramp Hiccup”, wondering if it was a buying opportunity.
“Most auto launches have hiccups and Tesla is no exception. We had long anticipated 2017 as possible for a ‘technical’ launch, but unlikely for high volume. The company’s specific guidance last quarter of 50 units in July, 100 in August and 1,500 for September moved our assumptions ahead slightly prior to the bottleneck,” Jonas said.
“There is some risk of micro-analyzing the monthly ramp of the Model 3. In our opinion, quality and attractiveness of early production is far more important than the quality delivered – at least for now. Our 2018 target of 120,000 Model 3 deliveries continues to bake in high levels of uncertainty around future production bottlenecks,” Jonas said.
Jonas said he didn’t see this delay hurting Tesla’s access to capital, but doesn’t expect it to become cash flow positive before 2019.
But the Wall Street Journal’s Grant wasn’t convinced, saying Tesla’s financial position was perilous, and pointed out that the competition is mounting.
“Tesla’s stock is valued as though the company can execute its vision flawlessly. The facts suggest the opposite. It is high time for Tesla – and Wall Street – to acknowledge reality,” Grant said.