Does Tesla have enough cash to fix Model 3 production woes?

Friday, 03 Nov, 2017

For the Model 3, the company's first mass-marketed auto, more than 450,000 people have preordered the vehicle.

Less than four months later, however, it's clear that things haven't been running as smoothly as Tesla and its CEO Elon Musk would like. Company officials now can't say when they'll reach their goal of producing 10,000 Model 3's a week. Now, let's take a quick look at Wall Street analysts' estimates for the company's 4Q17.

Anecdotally, some employees claimed they had either not received recent reviews, or their reviews were positive, undermining Tesla's justification.

It was not all doom and gloom for Musk's company, however.

Tesla expects its automotive gross margin to continue to worsen again in the fourth quarter, driven by high Model 3 costs associated with low-volume Model 3 production. Production began recently and the first few cars have been delivered to Tesla staff.

For Tesla to build 5,000 vehicles per week, Panasonic will have to increase battery cell production to an annual rate of 15 GWh, giving it the biggest output of any battery factory in the world. "However, we acknowledge that it is extremely hard to forecast with any reasonable degree of accuracy the true pace of progress of moving Model 3 from a position of severe bottleneck to free-flowing production". For his part, Musk admitted Tesla ultimately had to accept blame for its current problems.

"We were in level 9, now we're at level 8, and I think we're close to exiting level 8", Musk said.

That's more troubling than it might seem.

In other Tesla news, Director Kimbal Musk sold 2,190 shares of the firm's stock in a transaction on Friday, September 1st.

For example, this one is from a reservation holder who previously had the earliest possible window of "Oct 2017 to Jan 2018" available for the "first production" vehicles. Or will it? In a question-and-answer session, he subsequently warned there are "too many uncertainties" to predict the ramp-up pace at this point. Out of 18 total analysts who were surveyed, 2 rated it a Moderate sell, 1 rated it a Moderate Buy, 3 rated it a Strong Sell, 7 rated it hold, and 5 rated it a Strong Buy. Without that the carmaker won't be able to come close to the 500,000 annual production target.

Tesla posted a net loss of US$619.4 million, or US$3.70 per share, for the third quarter of the year, compared with a profit of US$21.9 million, or US$0.14 per share, a year earlier.

Tesla Inc. (NASDAQ:TSLA)'s stock had its "hold" rating reiterated by stock analysts at Citigroup a research note issued to investors on Thursday. "Another analyst firm said that Musk needs to 'stop over promising and under delivering".

Tesla's stock has risen 68% during the past year, and 998% in the past five years, making for a more than spectacular return for the bulls and leaving Tesla's bears, well, in the dust.

The company also reported its biggest quarterly loss ever, below analysts' expectations, sending its shares down almost 5 percent after-hours, after falling 3 percent in normal trade.