Tesla Moves To Bolster Pressurised Musk.
Share Price Dives Following Private Move Debacle.
“Perhaps Tesla will sell enough Model 3s in the second half of the year to turn a profit. That would relieve some pressure.
Tesla Inc soothed investors by appointing an ex-Daimler executive to take over the day to day running of car production, but critics soon emerged saying the move didn’t go far enough.
And for those investors getting wobbly about Tesla’s future, investment bank UBS provided some reassuring evidence that even when the German response, starting with the Audi E-tron and Mercedes EQC is up and running, the California upstart will have strong cards to play.
Reuters’ Breaking Views columnist Antony Currie said the appointment of Jerome Guillen to oversee production, and take the pressure off CEO Elon Musk, didn’t go far enough.
“Jerome Guillen, the new man in charge of the automotive unit, is no slouch. He was instrumental in getting an extra Model 3 production line set up within weeks earlier this year – albeit in a tent. Before coming to Tesla in 2010 he spent several years at Daimler, including taking the lead on its Freightliner truck program,” Reuters Breaking Views columnist Antony Currie said.
“But bringing in an experienced outsider would have been better. Missing from his background is expertise in running mass production lines, which is Tesla’s weakness,” Currie said.
Meanwhile the chief accountant and human resources executives have left the company.
Tesla’s stock price has dived nearly 25 per cent since CEO Elon Musk announced the company was going private in August, and then changed his mind.
Many investors have lost confidence in Musk, and are looking to spikes in the share price to sell their shares.
Germany’s Nord LB bank is in critical mode, pointing out Tesla’s failures, like failing to meet its production target of 500,000 car this year, with something between 250,000 and 300,000 more likely.
Nord LB, in a report summed up its criticisms, which recommended selling Tesla shares, with these worries –
- Quality and profitability of the Model 3
- Decline in production of the X and S models
- Elon Musk’s antics. (He recently appeared on a U.S. podcast holding what appeared to be a cannabis joint)
- The expected miss of the original production targets for 2018
- Relatively frequent changes in management
Not all investors have despaired of Tesla.
Morgan Stanley had high hopes sales of the Model 3 would produce average prices close to $60,000, which would include much highly profitable extras.
When the car was launched it was hailed as the first mass market Tesla, with a selling price close to about $30,000.
“Tesla may be in a position to sell a large number of Model 3 units with high variable margins. A good rule of thumb is that higher mix levels can generate 50 per cent incremental margins. Software based add-ons could bring even higher margins,” Morgan Stanley analyst Adam Jonas said.
UBS took a Model 3 to bits, and proclaimed that despite build quality problems it was the most impressive electric car around because of its hardware and software lead, while the electric powertrain was top notch in terms of cost, weight and energy efficiency.
“Our teardown shows a $2,000 like-for-like cost advantage (over the competition),” UBS said.
Tesla has IT advantage
“Based on our detailed research about upcoming EVs from the incumbents, we believe Tesla will be challenged in these areas that constitute a good EV in the traditional sense – range, performance, charge time etc – and certainly in build quality. However, it will be much more difficult to mimic Tesla’s innovation power on the IT side, because it disrupts traditional supply chains and organisations. Will this aspect be decisive for consumer choices? Time will tell,” UBS said.
Breaking Views’ Currie also saw profit possibilities for the Model 3, but worried about Tesla running out of cash.
“Perhaps Tesla will sell enough Model 3s in the second half of the year to turn a profit. That would relieve some pressure. If not, though, Musk will have to go back on another promise and be forced to raise capital. With the stock near a two-year low and bonds yielding roughly 3 percentage points above where they were issued, the most worrying thing he’s burning is cash,” Currie said.