The Tesla fail

The Herald reports:

Tesla has a big problem.

On Wednesday night, US time, the electric vehicle maker confessed what rumours had already suggested.

Its production processes are not working properly and in the last three months of 2017 it failed to make anything like as many vehicles as it had originally pledged.

Chief executive Elon Musk once said his company would make 20,000 of its affordable Model 3 vehicles in December alone.

 At the end of December Tesla counted up all the Model 3s it made in October, November and December and it was just 2,425. Just 1550 were delivered to customers.

 

This is not the first time Tesla has failed to keep a promise. The company has a pattern of missing self-imposed deadlines.

And more bad news:

The Model 3 is supposed to cost US$35,000 ($49,000) and sell in huge numbers. More than 400,000 people put down a reservation costing US$1000 on the basis of that promise. For now, though, the price tag is far higher than that, with buyers paying as much as US$57,500. And it is selling in puny numbers, limited mostly by Tesla’s inability to actually make the damn thing.

Costing two thirds more than what you promised kills credibility.

For as long as the ramp-up is delayed, losses are likely to accumulate. That matters because Tesla has relatively little money in the bank (cash of US$3.5 billion) relative to how much it has been using (free cash flow of negative US$3.2b in the last nine months).

If revenues are lower than costs for much longer, it may need to raise more money to keep paying staff.

Back in 2012, Elon Musk suggested Tesla would never need to raise more money again. The profits on the luxury cars would fund the mass-market car, was the plan.

Most of Tesla’s revenue has been corporate welfare from taxpayers. Around $7 billion off memory.

Tesla is spending as much as GM is, yet producing a fraction of the vehicles. GM has $25 billion cash reserves. Tesla has under $4 billion.

Their bubble will burst. Their market cap of US$50 billion is around the same as GM and Ford and three times Fiat.

But in 2016 those three companies each sold two to three million vehicles each. Tesla sold 76,000.