Anxiously awaiting the Tesla Model 3 electric vehicle for which you plunked down $1000 19 months ago to get in the queue for delivery of the more “affordable” of the company’s trendy vehicles? Don’t hold your breath. Nor should the 600,000 others who bought the Tesla promises for what appears to be a phantom vehicle. Shades of the Tucker 48.
Tesla announced last Wednesday (Jan. 3) it has added another three months – to the end of June 2018 – to its production target for the troubled Model 3, aimed at an “entry level” price tag of $35,000. That compares to the much higher prices for its Model 2 sedan and Model X SUV. Tesla CEO Elon Musk had originally promised delivery 100,000 Model 3s in the second half of last year.
Last July, he said Tesla was aiming for producing 5,000 a week by the end of the year. It was more flim-flam from Tesla, demonstrated by kicking the production numbers another six months down the road. Tesla says it produced 2,425 Model 3 cars in the final 2017 quarter.
The company has not been able to conquer serious production problems. The first several hundred Model 3s were basically hand-made and much of the production is still not automated to a significant degree. Tesla has had serious production problems with all of its models.
Tesla also announced a quarterly loss of $619 million in November. It is losing significant money on every vehicle it produces. Tesla has repeatedly put a happy face on its production problems. Investors have largely given the company that makes the trendy cars the benefit of the doubt, although its stock fell from $321/share to $311 after the latest delay announcement.
Writing for Bloomberg Gadfly, analyst Liam Denning said that the “benefit of the doubt is now long in the tooth.” And time is not Tesla’s friend. The new targets, noted Denning, “have a real impact for a company burning well north of $1 billion per quarter in negative free cash flow. Every delayed Model 3 is revenue that isn’t coming in yet to offset the billions of dollars already put into building that hellish production line the company is trying to crank up.”
Getting the Model 3 produced in quantity (along with quality) is crucial for Tesla. The San Jose Mercury News quoted Kelly Blue Book analyst Akshay Anand, “Tesla need to get the Model 3 right in order to succeed as a company.”
Back in November, I wrote, “Is high-flying Elon Musk, Tesla CEO and pureyor of electric and self-driving cars (and maybe trucks), battery storage for solar systems, private-sector space ships, and ‘hyper-loop’ transportation headed for a crash?” That question remains valid.
Oh, and for those unsteeped in automotive history, the 1948 Tucker 48 was a futuristic post-WWII car conceived by entrepreneur Preston Tucker. It got an enormous amount of hype but only 51 cars were made (it would cost you well north of $1 million to buy one at auction today) before the company cratered amid false charges of securities violations. Director Francis Ford Coppola owns a Tucker 48 (widely known unofficially as the “Tucker Tornado”) and directed the 1988 movie “Tucker: The Man and His Dream.”
— Kennedy Maize