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Will Tesla Fail?

Will Tesla Fail?

The stock is crashing. Then, the entire market is on a downward trend. That does not take away from the fact that Tesla is crashing for some reasons unrelated to the rest of the market.

I figured out 2 things about the stock market a long time ago: 1) It is legalized gambling; and 2) It is not rational. Anyone who says different is a stock broker.

What are the threats to Tesla that are apart from the normal ups and downs of the stock market?
1. Concerns about Model 3 production.
2. Tesla’s debt load and Moody’s downgrade to a BBB credit rating today.
3. The crash of a MX on a California freeway.

Model 3 Production
Suppose Elon Musk had said something like this instead of what he did say early in 2017: “We are putting in an entirely new way to manufacture a car that is 90% automated. There will, naturally, be a learning curve before we can reach full speed. Our goal is to reach these milestones in 2018: 2,500 vehicles a week sometime early in the year, 5,000 around midyear, and 10,000 by the end of the year.”

Would the trashing we’re seeing now be as loud if Musk’s projections had been less rosy? I doubt it. Instead of giving him a pass for innovating how cars are assembled, the press and hedge funds would be all over Tesla for: 1) being under capitalized; 2) just more vaporware, electric cars are too expensive for the average person and there is no getting around it. Hedge fund managers and market experts would be hammering Tesla on those grounds right now.

Tesla is not just another start up car company, even those are rare. What Tesla is doing threatens to disrupt several established industries. The establishment doesn’t like that. First and most obvious, it forces legacy carmakers to blow apart their business models. They’re used to peddling small incremental improvements to a century old technology. Throwing all that out is disconcerting. Second as equally as obvious, if Tesla succeeds others must follow and that is an existential threat to the oil industry. The Koch brothers and others of their ilk don’t like that. Third, electric cars are much simpler than ICE cars. They require fewer parts and that threatens the livelihood of thousands of companies that supply parts to the likes of GM and BMW. Fourth, Tesla’s sales and service model blows apart the established means for distributing cars, obviously. Tesla has dealt the car dealer out, something we all celebrate (No one likes buying a car from the moron with 12 gold chains around his neck). This is a giant headache. Sixth, transitioning to electric cars requires massive investment in charging infrastructure. Governments aren’t fond of that, legacy car companies accustomed to shoveling off the fueling issue to the oil industry are certainly unhappy about that. The owners of all those gas stations out there aren’t happy either.

In short, there are a lot of gored bulls out there who are tearing up the china shop who delight on jumping on every Tesla failure, real or imagined.

Circling back to M3 production, Musk missed on the timing as he usually does. We’re used to it. Seeking Alpha and Forbes see it as a point of attack. Still, there is valid reason for concern if Tesla is still stinking it up getting that assembly line going.

They aren’t. New robots were brought in and installed in February because some of the ones on the line weren’t working well. This caused a drop in deliveries. If that drop is continuing without an end in sight then that’s really bad for Tesla.

It isn’t. The past few weeks, Tesla has applied for thousands more VINs, a much higher rate than it had been. Bloomberg’s estimate is Tesla is now producing at the rate of 1,026 M3’s a week. Only, Bloomberg warns that actual production is probably much higher of late than its model indicates because of a lag in how the data is applied. Has Tesla hit 2,500 cars a week yet? Probably not. If it’s truly 1,000 then that will cause Tesla problems. If it’s closer to 2,000, then that is much less a problem, particularly if Tesla’s ramp up continues like it apparently is. Is being off a week or two in reaching 2,500 cause for panic? Only if you’re a legacy car maker or a hedge fund manager hoping Tesla tanks. Otherwise, it will be a blip that will soon be forgotten.

Tesla’s Debt
As Musk has said, entering the car industry is crazy. The overhead, costs and technical headaches are daunting. To put cars in peoples’ driveways costs a lot of money up front. You need factories, in Tesla’s case a lot of batteries, engineers who don’t come cheap, robots that cost 7 to 8 figures, delivery points to give customers their new cars. Tesla is gambling that the M3 will be a huge hit and has invested in equipment, etc to do it. M3 reviews are hugely positive. Public interest, meaning potential customers, is there in spades. But all that means naught if you can’t make enough cars fast enough to make all that investment pay off.

In reality, Tesla is already churning out a ton of M3’s despite the production problems and the cash is starting to flow. Bloomberg estimates 11,350 M3s have already been delivered. These are all high end, more expensive models. Assume Tesla is clearing $7,000 per vehicle. That works out to 11,350 x $7,000 = $97,450,000 in gross profit in the first quarter alone that wasn’t there a year ago. If Tesla did nothing else to improve production that would work out to roughly $390 million added to revenues above costs for all of 2018. Of course, that figure will be superseded and by a lot.

Some are pointing to a 30% ordering rate for Tesla’s backlog of reservations. That doesn’t matter all that much. What matters is cancellations. Many are waiting for more options to become available and only a fraction of people with reservations have been invited to configure their cars as yet. If 70% are asking for their $1,000 back, that’s a problem. But nobody knows what the rate is outside of Tesla. Those guys are guessing, many through rose colored glasses.

If Tesla hits 5,000 or so cars a week by June/July, the debt problems will disappear. Moody’s will eventually follow suit upgrading Tesla’s credit rating.

The MX Crash
Horrible accident. But like with terrorist attacks, probably overblown. (You’re 35,000 times more likely to die of cancer than at the wrong end of a terrorist’s gun, but what do we do? We spend trillions hunting down terrorists and starve the NIH for bucks to fund research to seek cures for cancer).

What we know is that a MX attempted to switch lanes, hit a concrete barrier between lanes where the whatever it’s called was collapsed due to an accident the previous week and hadn’t been repaired, launched into the air and came down right side up on the freeway and was hit by two other cars. The MX was completely destroyed. Emergency services came and took the driver to the hospital where he unfortunately died. After the ambulance had left, the battery pack caught fire with half burning. NTSB is investigating and there are more questions about autopilot being ready for prime time.

What we don’t know is:
1. Was EAP engaged? No one knows yet.
2. Was the crash due to driver error or the software.

What we do know is that EAP is somewhat misnamed. It’s still traditional cruise control with a few more features. Tesla tells everyone that EAP is not full autopilot and the car turns it off if you take your hands off the steering wheel for too long.

This may turn into a big deal, my guess is it won’t. Anyway, I think we get too far ahead of ourselves as drivers if we think there is full autopilot available. It isn’t. Tesla warns and warns, it’s right there in the manual, but many don’t listen.

Will Tesla fail then? I don’t think so, as long as M3 production is ramping up like it appears to be. I would stay away from the stock for a while until it finds its floor. Then look at M3 production numbers and buy low before the straight press figures it out.

But they gotta start making a whole lot of M3’s, sooner rather than later.

SCCRENDO | 28 marts 2018

No they won't fail. Trying to decide whether to buy more stock now or get greedy and wait for more of a drop.

stammit | 28 marts 2018

"Bloomberg estimates 11,350 M3s have already been delivered. These are all high end, more expensive models. Assume Tesla is clearing $7,000 per vehicle. That works out to 11,350 x $7,000 = $97,450,000 in gross profit in the first quarter alone that wasn’t there a year ago. If Tesla did nothing else to improve production that would work out to roughly $390 million added to revenues above costs for all of 2018."

I own a decent chunk of TSLA, am awaiting my 3, and am generally in agreement with your post, but the assumptions in the quote above don't mean anything. Forget profit per vehicle sold, the problems are related to cash-flow and the extremely high cash burn rate. Tesla will likely be able to raise the necessary capital to pull through, but the cash problems are very real.

johnmaxwell | 28 marts 2018

I have no intention of leasing another Tesla, my Model S is poorly made, the software updates have gotten buggier over time and I want things like a coat hanger in a $100K car. I've talked to many other owners who feel the same.

scabello800 | 28 marts 2018

Tesla has nearly 40,000 employees. That means each employee makes what.. 5 cars?
Toyota gets 25 cars out of an employee per year.
How is this automation?
I understand Tesla has their own dealership system (which should improve their margins) and their own service centers (which may contribute meaningful revenue as cars come off warranty) but then they have costs with the supercharging where they lose money.

The number of employees is hard for me to wrap around my head.. their customer service is in the pits too..

I think tesla will do okay but the stock is very expensive and i think the biggest hit are the fatalities.. if people are using autopilot and getting killed then that is bad for business. Tesla sells this vaporware of an autopilot that will drive the car for you. i tried to find parking at a venue last weekend, it sure would have been nice to have a tesla that would go park itself two miles away and wait for me to summon it back. But this is all a dream and not reality now. This is the problem with tesla and the technology.. realistically we are many years away from this happening and how long will wall st let tesla burn cash?

It is a good time to be a bondholder of tesla. for the lowest rated junk debt it trades very high. this is because the bond holders hope tesla goes bankrupt and they get to own the equity. but I doubt that will happen because tesla will have no problem getting another 2-3B in debt. I think their debt load needs to exceed 20B for the investors to disappear

Middledawg | 28 marts 2018

stammit
The cash burn should be slowing.

scabllo
I strongly disagree about customer service. I've had nothing but excellent experiences.

Tesla has NEVER said autopilot is fully operational. Let me ask you something: Has a Mercedes, BMW, or any other car ever crashed while using cruise control? Sure they have. Every day, 100 Americans die in auto accidents. The global casualty rate for Tesla drivers and passengers is 0.3 fatalities per 100 million miles driven. U.S. deaths in auto accidents average 1.08 per 100 million miles driven.

Here are the warnings in my MX manual regarding driver assistance.

Warning: Tra c-Aware Cruise Control is designed for your driving comfort and convenience and is not a collision warning or avoidance system. It is your responsibility to stay alert, drive safely, and be in control of the vehicle at all times. Never depend on Tra c-Aware Cruise Control to adequately slow down Model X. Always watch the road in front of you and be prepared to take corrective action at all times. Failure to do so can result in serious injury or death.
Warning: Although Tra c-Aware Cruise Control is capable of detecting pedestrians and cyclists, never depend on Tra c-Aware Cruise Control to adequately slow down Model X for them. Always watch the road in front of you and be prepared to take corrective action at all times. Failure to do so can result in serious injury or death.
Warning: Do not use Traffic-Aware Cruise Control on city streets or on roads where tra c conditions are constantly changing.
Warning: Do not use Traffic-Aware Cruise Control on winding roads with sharp curves, on icy or slippery road surfaces, or when weather conditions (such as heavy rain, snow, fog, etc) make it inappropriate to drive at a consistent speed. Traffic-Aware Cruise Control does not adapt driving speed based on road and driving conditions.
Warning: Due to limitations inherent in the onboard GPS, you may experience situations in which Traffic-Aware Cruise Control slows down the vehicle, especially near highway exits where a curve is detected and/or you are actively navigating to a destination and not following the route.
Warning: Traffic-Aware Cruise Control can not detect all objects and may not brake/ decelerate for stationary vehicles, especially in situations when you are driving over 50 mph (80 km/h) and a vehicle you are following moves out of your driving path and a stationary vehicle or object is in front of you instead. Always pay attention to the road ahead and stay prepared to take immediate corrective action. Depending on Tra c-Aware Cruise Control to avoid a collision can result in serious injury or death. In addition, Tra c-Aware Cruise Control may react to vehicles or objects that either do not exist or are not in the lane of travel, causing Model X to slow down unnecessarily or inappropriately.
Warning: Traffic-Aware Cruise Control may be unable to provide adequate speed control because of limited braking capability and hills. It can also misjudge the distance from a vehicle ahead. Driving downhill can increase driving speed, causing Model X to exceed your set speed. Never depend on Tra c-Aware Cruise Control to slow down the vehicle enough to prevent a collision. Always keep your eyes on the road when driving and be prepared to take corrective action as needed. Depending on Tra c-Aware Cruise Control to slow the vehicle down enough to prevent a collision can result in serious injury or death.
Warning: Traffic-Aware Cruise Control may occasionally brake Model X when not required or you are not expecting it. This can be caused by closely following a vehicle ahead, detecting vehicles or objects in adjacent lanes (especially on curves), etc.

Does that sound like Tesla is touting its cruise control as fully autonomous? No, it doesn't.

As for the number of employees, Tesla currently employs 6,200 people at its Fremont production facility, down slightly from 6,800 when GM owned the same factory. Tesla says it plans to increase the number of employees actually engaged in assembling the cars to 9,300 as production ramps up.

Again, counting sales and service people is not comparing apples to apples because legacy automakers shove those functions off on dealerships.

Johnmaxwell
Consumer Reports reports that Tesla Model S ranks #1 in the world in the level of customer satisfaction with the car. 98% of respondents said they would buy a Model S again. Chevy Volt was #2 at 85%, followed by the Honda Accord Hybrid also at 85%. IOW, you're in a very small minority. Entitled to your opinion, but there aren't many owners who share the same opinion.

Middledawg | 28 marts 2018

Forgot to mention the ratings criteria used by Consumer Reports:
Drive - Excellent
Style - Excellent
Features - Very Good
Comfort - Excellent
Fuel Economy - Excellent
Value - Very Good
Repair Cost - Excellent
Cargo Space - Excellent

The Volt as a barometer:
Drive - Excellent
Style - Very Good
Features - Very Good
Comfort - Good
Fuel Economy - Excellent
Value - Good
Repair Cost - Excellent
Cargo Space - Fair

exPGAhacker | 28 marts 2018

See you johnmaxwell. I, for one, will miss you. However sad as I am that you are leaving us, I am sticking around, and just took delivery of my 4th Tesla since 2013. Look, millions of people buy new cars every year. Tesla won't get all of them, just like GM won't get all of them, and Toyota won't get all of them, etc. But starting with the Roadster as a proof of concept, Tesla has gone gangbusters trying to change the world for the better. That's worth something. Are the risks mighty? Yup. Are the stakes expensive? Yup? Is starting a new car company financially feasible in today's world where old money is not only rooting for you to fail, but throwing millions all over the country to back haters of this new paradigm? Yup.

But I get it John. You want coat hangers in your cars! Then damnit, you go get those coat hangers.

SO | 28 marts 2018

I remember the day the stock dropped to 140 after the Model 3 reveal a couple months earlier. So many “experts” said it was game over, the stock will never come back, etc.

A week later, it was higher than before the drop.

If Tesla didn’t have a customer base and had cars sitting on the lot and the plant sitting idle because of a lack of demand, I’d be worried. That is not the case.

Let the shorts pile on. Let them scream the sky is falling. I just wish they would short more so they can really get squeezed.

SO | 28 marts 2018

@johnmaxwell - goodbye.

Tropopause | 28 marts 2018

Shorts and trolls are having a field day! Enjoy little nomads for you can not hold down Tesla nor the future that await them.

David N | 28 marts 2018

Elon has said many times early on that if Tesla is to succeed,the Gigafactory and Model 3 are crucial. The plan was to have both be ready at the same time. You can't build cars without battery packs, and you can't make battery packs if the cars are not ready for them. It was all about timing, and Elon knew it and said so. Stalled production on either of those costs Tesla millions each day. That's why it is so important to get the Gigafactory and Model 3 production in-sync, ramping up to stated goals. The longer the delay continues, the more serious the financial concerns get.
Am I worried? A little bit because I know there are genuine concerns that lie ahead. But then again, I just bought more Tesla stock on this dip, so although I'm concerned, I trust Elon will do what needs to get done. He has too much invested(time, reputation, sweat) to let it fail.

sosmerc | 28 marts 2018

So at this exact point in time, does anyone produce a car with the performance, range and features of a Tesla? It is supported by an ever expanding network of supercharging stations that support long distance travel? If that competition existed today I would be concerned about the future of Tesla. But it doesn't exist....yet. I have an order in for more Tesla shares should the price get as low as $200. I have faith that Tesla will overcome their challenges and continue to lead the way.

FREE ENERGY | 28 marts 2018

dmm1240, great summary, thx !

FREE ENERGY | 28 marts 2018

dmm1240, great summary, thx !

reed_lewis | 29 marts 2018

@scabello800 - Using the number of employees as a benchmark is comparing apples to oranges. Toyota has no sales and service employees. Their cars are sold by independent dealers. Tesla OTOH has employees who sell and service their cars. So pretty much the vast majority of Toyota employees make the cars. This is not comparable at all...

bp | 29 marts 2018

Tesla seems to go through this every time a new model is released. It happened with the Model S, concerns about producing & selling the cars in volume and quality control. Same thing with the Model X, complicated hardware, slower than expected production & sales, and quality control. And repeating the same process again for the 3.

Cash will continue to be the major concern - until they can sustain positive cash flow, they'll be at risk of running out of strategies for raising additional funds or deferring costs.

While we should be concerned about Tesla's ability to get through this period of concern, that probably won't prevent us from pulling the trigger on ordering our Model 3, as soon as they offer the configuration we want.

ed.fletcher.59 | 29 marts 2018

I just bought more stock yesterday. There is just a real big push lately by the naysayers in the media. This is not the first time a Tesla crash has been investigated. If you look at the safety history of the car, it is outstanding. There is story after story of first responders stunned that a person could have survived the crashes that Tesla drivers have.

The company is growing at a fast rate. Model 3 production is ramping up. The only thing they've done wrong is be too optimistic. I'm still excited by what I'm seeing.

RadOne | 29 marts 2018

On Fox Business News this morning, said Tesla headed towards "financial collapse."

Rocky_H | 29 marts 2018

Oh jeez, gotta love B.S. comments like this:

@scabello800, Quote: “Tesla has nearly 40,000 employees. That means each employee makes what.. 5 cars?”

Tesla is multiple huge industries. This person counts all of Tesla, which includes cars, Powerwalls/Powerpacks, solar panels, semi trucks, and I think maybe Boring/Hyperloop is included under the Tesla umbrella still, and the person pretends that all of them are supposed to be working on cars and are doing a terrible job at it. Oh yeah, and as other people mentioned, the separation of employees of traditional car dealerships. Huh—those tens of thousands of employees produce zero cars. That’s terrible!!! Ha ha. That kind of dishonesty doesn’t help make your point.

Chunky Jr. | 29 marts 2018

Here's a great video I found on TMC that talks about Tesla's cash flow and why they may never go broke. Worth a watch. https://www.youtube.com/watch?v=BHS0H5AwGjU

mcdonalk | 29 marts 2018

I certainly hope that they survive. As I write this, there is a crew on the roof and in the garage installing Tesla solar panels and Powerwalls.

2018wesm | 29 marts 2018

People Aren't screaming about AMZN, which has been affected the same way.
Both stocks have breached the negative resistance level this quarter, not just TSLA

Middledawg | 29 marts 2018

Someone leaked a memo to Bloomberg from Doug Field, Sr VP of Engineering to Fremont employees dated March 21 that indicated Tesla had achieved a sustained M3 production rate of 200+ vehicles per week. For giggles, let's say the "over" is 30 cars. That works out to, as of March 21, 230 x 7 = 1,610 M3's rolling off the assembly line that week.

Fields went on to urge employees to prove naysayers wrong by upping that rate to 300 by the end of the quarter.

300 x7 = 2,100 per week

To achieve 2,500 would take 357 daily.

According to Bloomberg and Electrek, an uptick in new M3 VIN registration points to Fields' memo being legitimate.

On another note, Bloomberg obtained another memo from Peter Hochholdinger, VP of Production, announcing a one day shutdown of the S/X assembly line. Speculation on my part: It could be a change to up production, or it could also indicate a change in what is being manufactured meaning a physical upgrade to new X and S's of some kind.

https://electrek.co/2018/03/29/tesla-model-3-production-units-quarter/

joemar10 | 29 marts 2018

@RadOne
If Fox Business News reported the imminent collapse of Tesla, it's got to be true. I'm Immediately selling all of my TSLA and climbing into my TEOTWAWKI shelter.

SUN 2 DRV | 29 marts 2018

"sustained M3 production rate of 200+ vehicles per week."

Possibly you meant "per day"?

Middledawg | 29 marts 2018

Yes, I did. Sorry bout dat.

SO | 29 marts 2018

Had this latest Model X accident been with a gas car, there probably wouldn’t have been an intact body to even bring to the hospital.

MitchP85D | 29 marts 2018

My wife and I will own a Tesla till the day we die. I think the number of Tesla owners who share our opinion will only grow. Tesla will prevail!

ken | 29 marts 2018

Excellent points dmm1240. Let remember that is was General Motors who went bankrupt, had to be bailed out by our government and defaulted on my GM bonds. Tesla will do quite well, there will be a few minor 'curves in the road' such as these but all to be expected and minor. I am a PhD Mechanical Engineer, PE too, and a car guy from 18 years old - my Model S is technically the best and most sophisticated car I have ever been in, much less owned. Far more advanced that the supposed 'exotics.' I have 2 M3s on order and will gladly purchase both. even trying to swing for a Roadster. nope, no failure here just demonstrating what can be done by a CEO / part-owner with vision and determination. Its truly impressive and quite amazing. then theres SpaceX too.. warp5!

Silver2K | 29 marts 2018

dmm1240 | March 29, 2018
Someone leaked a memo to Bloomberg from Doug Field, Sr VP of Engineering to Fremont employees dated March 21 that indicated Tesla had achieved a sustained M3 production rate of 200+ vehicles per week. For giggles, let's say the "over" is 30 cars. That works out to, as of March 21, 230 x 7 = 1,610 M3's rolling off the assembly line that week.
Fields went on to urge employees to prove naysayers wrong by upping that rate to 300 by the end of the quarter.
300 x7 = 2,100 per week
To achieve 2,500 would take 357 daily.
According to Bloomberg and Electrek, an uptick in new M3 VIN registration points to Fields' memo being legitimate.
On another note, Bloomberg obtained another memo from Peter Hochholdinger, VP of Production, announcing a one day shutdown of the S/X assembly line. Speculation on my part: It could be a change to up production, or it could also indicate a change in what is being manufactured meaning a physical upgrade to new X and S's of some kind.
https://electrek.co/2018/03/29/tesla-model-3-production-units-quarter/
-------------------------------------------

300 is easy to achieve for tesla, because they are close to 300 for s/x production. the model 3 is simpler, they just have to get through the bottlenecks.

SO | 30 marts 2018

And they will get through those bottlenecks. Before this, all the press was how they couldn’t get the Model X out the door. Before that, the S. Now, those two product lines are doing very well. Same thing will happen here for the 3.

amareshvanga | 30 marts 2018

I am very bullish on tesla.It may have problems now as this is a hard industry to make headways right away and Tesla has already acheived half of the battle by coming to this point.
There are many elements in play that want to see Tesla Fail.but it will not(sorry shorters). I am a very realistic guy when it comes to stocks and i am still bullish on this one.When you see techanical and fundemental analysis you see that this stock is horrendous.But when you see beyond that-- it is making innovative products and will continue to do it,has one of very hardworking and knowledgable CEO at the helm, there is every reason to belief that this stock is going to be a success.
Just be careful buying the stock on its way down.You want to wait untill stock bottoms out and then invest more(that way you are catching at the down point and not on middle of fall)
Wait for one positive stock day for tesla(where price of stock is more than previous day) and make sure next 3-4 days have close enough price action to this price(that means the range doesn't undercut the low price point of range of previous point).then you know it bottomed out and be aggressive in investing.I use this tactic and always come ahead 90 percent of time.Hope this helps.

Tesla-David | 30 marts 2018

@Johnmaxwell, goodbye, don't let the door hit you on the way out. Couldn't disagree with you more, as a five year+ (2 MS's, and M3 owner). I love everything about our vehicles, and have also been a long time TSLA stock holder (purchased at IPO), and am waiting to get our Powerwall-2 installation.

I am also very bullish on Tesla. It is way more than an automobile company, with it's solar panel/roofs, energy storage, and vehicles. I embrace its mission: " to accelerate the World's transition to sustainable energy".

bp | 31 marts 2018

Tesla is trying to do something that hasn't been done in a very long time - create a new high-volume US automaker.

Even though I'm an "early adopter" and long time Tesla customer and supporter, I made those purchases knowing there was risk. Buying a car from one of the established vendors is safe - they aren't going any where, but it was worth the risk to purchase two cars from Tesla - which (at the time) were the longest range EVs on the market.

Until Tesla can achieve profitability, they will go through periods of increased risk as they overcome major challenges - just like any other new company does.

Could they fail? Yes... Who would have thought Sears, K-Mart, Toys R Us, Circuit City, ... would have failed?

Looking longer term, Tesla should be able to overcome today's challenges.

The recall for the rusting bolt isn't a reflection of a major problem, all manufacturers do recalls for parts that need replacement.

Until the auto industry perfects self driving technology, all companies will have vehicles in accidents - and deserve scrutiny to understand what happened and determine if anything could be done in hardware or software to avoid future crashes. This happens to human drivers too - why insurance companies charge more for younger drivers.

The manufacturing challenges for the Model 3 have placed Tesla into a prolonged "production hell", but it's not like they're using brand new technology that isn't being used elsewhere - since they're using more automation than other manufacturers, what they're doing is more complicated - but once they get everything working, Model 3 production should ramp up quickly - and these issues will be in our rear-view mirrors, just like the early production challenges for the S & X.

Even with the risks, we're still planning to place the order for our Model 3 - as soon as the configuration we want becomes available...

Mike83 | 31 marts 2018

With about 30 million shares borrowed and shorted we have vested interest in Tesla FUD
The gambling of shorting could bankrupt them, perhaps that's why they discuss that topic. I can see them losing billions very easily.

RadOne | 31 marts 2018

@Mike83. Aren't the shorts making money now? TSLA down 30% from the high.

Mike83 | 31 marts 2018

On paper only. about 60% of trading is by shorts. They have to buy a lot of shares to make anything. If no one sells the price goes unless they keep shorting at a lower price.

Middledawg | 31 marts 2018

Been thinking about all this and attempted to put a timeline/explanation together. (Posted on the M3 forum as well).

Here is what I think happened:
1. Tesla bought and installed 467 new robots 4/27/17 manufactured by Kuka Robotics.
2. The robots were installed on the new M3 line over the spring and summer of 2017.
3. The first M3s started rolling off the assembly line in early July 2017.
4. The fast ramp up to 2,000 units per week by the end of Q3 never happened.
5. About one month into Q4, Tesla announced the 2k+ target would be achieved by the end of Q4. It never happened.
6. Toward the end of 2017, reports surfaced that there were problems turning out M3 battery packs at the Gigafactory in Nevada.
7. At the beginning of Q1/18, Tesla announced a goal of 2,500 M3s produced per week by the end of Q1/18.
8. A few weeks later, Tesla announced that new robots were being shipped from Germany.
9. The M3 assembly line was shut down for about a week in late February.
10. In March, we’ve seen a dramatic uptick in new VIN registrations coupled with ever rosier projections by Bloomberg’s M3 Production Tracker.
11. Bloomberg has been saying that its model has some lag time; they point to the dramatic uptick in VIN registrations as a key indicator of future production. The Bloomberg webpage has now added an estimated future production number that indicates production will top 2,000 units per week by the week of 4/14 with a stopover at around 12-1300 produced the week of 4/7.
12. Musk recently said to expect production figures to shoot up dramatically instead of gradually from here on out.
13. Reports of “finish” problems with newly delivered M3s have anecdotally decreased the past couple of weeks.

What can be deduced from all this?

The early rosy predictions of a fast ramp up to 5-10,000 cars assembled per week were driven by faith in the Kuka robots doing the job as expected coupled with no concerns with the Gigafactory keeping up. That optimism was misplaced. Here is why:

1. The original Kuka robots did not perform as promised. Tesla tinkered with them the remainder of 2017 but could never coax the machines to work properly.
2. Issues producing batteries in mass numbers at the Gigafactory amplified the situation. Based on news reports, the problem was centered on robots performing up to specs in assembling battery packs.
3. Sometime late in 2017 or early January, Tesla put out a “fix it or else” call to Kuka Robotics. New machines were made and quickly shipped to Fremont arriving around Valentine’s Day.
4. Tesla then proceeded to test, calibrate and install the new robots. Installation occurred in late February. The new Kukas are apparently now working as desired. There was some incremental uptick after the new robots went on line, probably to test, but now production is obviously ramping up at a faster pace, much faster.
5. After the dramatic production drop-off in late February, output steadily improved. By the third week in March Tesla was churning out roughly 1,500 cars per week, probably 225 or so a day. (The Bloomberg estimate is low because their model can’t account immediately for upticks in production. If you rely on Fields’ memo to employees indicating production north of 200, 225 is a reasonable estimate).
6. Tesla is indeed making a late quarter push to get production as close to 2,500 for the week of 3/25-3/31 2018 so that they can say, “We achieved the 2,500 goal late in the quarter” to calm the waters some.
7. The difference here with Q1’s rush is this one is much more likely to be sustainable. Tesla is likely to achieve 3,500 or thereabouts production by mid may. The last push to 5,000 by the end of June is just as probable as long as the robots perform well at high speeds.

What is the future likely to bring?
1. Tesla’s critics will still be there but with less ammunition in their quivers. Early on, criticism will center on an inhuman push to meet goal the last week intended to keep critics at bay, but this frantic pace cannot be sustained. After a period of time, as Tesla keeps it up, emphasis will shift to dissing Tesla meeting the next goal of 5,000 M3s produced weekly.
2. Tesla needs to get out in front of the MX crash to mitigate the PR damage. This is easily done. They should simply point to the manual, which explicitly and repeatedly states that EAP at this point is nothing more than a driver assist, that even the software number (L2) indicates that autonomous driving is not possible and that ultimate responsibility to control any Tesla belongs with the driver.
3. The recall is a non issue. Replacing a bolt that may rust out if it is continually splashed with the alternative to rock salt to melt snow is not a big deal. Recalls happen all the time. The timing of the announcement is the problem.
4. Once Tesla hits the 5,000 weekly number on M3 production things will calm down considerably.

Anyway, that’s my take.

sdbreslow | 31 marts 2018

DMM1240-

Intuitive post although I completely disagree with your first two points. And yes, I am a "broker." LOL! I don't gamble... I own a Tesla but no TSLA stock at present.
I do agree TSLA will ultimately succeed one way or another. I do agree the stock price remains extraordinarily high despite the dip. The bond ratings are a problem imho given the business model.
Stock prices do trade on some level of emotion. Particularly moon shot companies. TSLA is literally a moonshot company.
Eventually all stocks end up trading at P/E's that are consistent with their peers. TSLA remains interesting and hard to value since it has no defined peers yet. That's the rub.
The service is superior from my experience thus far.
The S is truly inspirational.

sdbreslow | 31 marts 2018

DMM1240-

Intuitive post although I completely disagree with your first two points. And yes, I am a "broker." LOL! I don't gamble... I own a Tesla but no TSLA stock at present.
I do agree TSLA will ultimately succeed one way or another. I do agree the stock price remains extraordinarily high despite the dip. The bond ratings are a problem imho given the business model.
Stock prices do trade on some level of emotion. Particularly moon shot companies. TSLA is literally a moonshot company.
Eventually all stocks end up trading at P/E's that are consistent with their peers. TSLA remains interesting and hard to value since it has no defined peers yet. That's the rub.
The service is superior from my experience thus far.
The S is truly inspirational.

Mike83 | 31 marts 2018

although not mentioned in the news, Bosch is paying for the bolts as it was their OEM part I believe.

Middledawg | 31 marts 2018

sdbreslow:

My financial planner agrees with you. We "discuss" our theories all the time.

Tesla stock is too high and hard to value, though. That's why I have a MX and no stock. If they make it through the M3 growing pains, then the MY rollout should go a lot smoother and they'll be off and running. The fly in the ointment is whether our fearless leader manages to crash things with his sledgehammer tariffs. A trade war is not what Tesla needs right now.

Mike83 | 31 marts 2018

Tesla is a American manufacturer and has big benefits including the new corporate tax rates. M3 is ahead of schedule; it seems to me the Fudsters try to make an issue of it. All IMO. I actually don't mind and enjoy buying stocks on sale. Long term investor.

chungp23 | 31 marts 2018

I'm thinking of buying 100d model s, but the financial situation of Tesla, Will it still survive by end of this year, what happen to warranty, it's $100k car, it's a big risk!

Madatgascar | 31 marts 2018

Well, you can look at it this way - DeLorean failed over 25 years ago, and there is still a DeLorean organization (no relation to the original) and owners can still get their cars serviced.

Tesla now makes more cars in a month than DeLorean ever did, so you can be pretty sure there will still be a way to get the cars serviced if Tesla fails.

But Tesla won’t fail.

SO | 31 marts 2018

This “Tesla will fail” nonsense has been around for about a decade.

Here is one from 2010.

https://www.autoblog.com/2010/08/19/one-stock-analyst-says-tesla-will-fa...

SO | 31 marts 2018

And another from 2012. Also complaining of the overvalued stock price of $32.

https://m.phys.org/news/2012-06-tesla-sedan-company.html

apsley | 31 marts 2018

The teachings of a man named W Edwards Deming would definitely help Tesla at this critical time in its history. Deming was an American statistician sent to Japan after WWII to teach them about quality and is largely responsible for the dominant position Japan has in terms of manufacturing today. He was largely ignored in the West but is revered in Japan and his ideas could definitely help Tesla but the question is whether anyone at Tesla would be willing to learn from his ideas.

Middledawg | 31 marts 2018

@Apsley

Maybe I'm the one guy who got the good one... as far as I'm concerned the quality on my MX is nothing short of outstanding. I'm pleased with the car in every way possible.

Chunky Jr. | 1 april 2018

Seems to me that a company that has several hundred thousand people lined up to buy their $40-50K product, and several thousand more to buy their $100K+ products, does not go bankrupt. It raises more money.

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