During the past five years Tesla’s stock price has climbed from $30 per share to $385 per share this year. That represent a 1,000% plus gain in less than five years. What is even more impressive is that to-date Tesla has not returned a single cent of profit and that its cash burn is astounding.
Concerns are mounting that unless Tesla successfully manages to transfer brilliant ideas into brilliant product quickly, the future may not be as exciting as the past. So what is holding back Tesla?
The Model 3
The “$35,000 electric car” has been Tesla’s top goal and marketing calling card for years. It’s an important price point, competing with entry level luxury cars like the BMW 3 Series and the Mercedes C Class. When you include a $7,500 US tax credit, the price is cheaper than the average new US car.
But on Wednesday’s call with analysts, Tesla pushed back its timelines for the Model 3 by three months. A production rate of 5,000 a week won’t be achieved until the end of March, rather than the end of next month. The $35,000 base model has been pushed back from November 2017 to sometime in 2018. Forget a new Model 3 this Christmas.
Perhaps the biggest warning flag: last quarter Musk promised 10,000 units per week by the end of next year. Suddenly this seems to be just another ‘Musk’ promise.
The Solar Roof
A year ago this week, Tesla unveiled its remarkable solar shingles with much fanfare in Hollywood on an old set of “Desperate Housewives.” It began taking deposits in May. There’s still little indication of when the product might roll out. Recently, a target for some time in 2018 was set. However, for customers planning a roof that promise may not be enough.
Autopilot
A year ago Tesla started charging $8,000 for a feature called Full Self Driving. There’s still no sign of a rollout of such features, and Musk hinted that a more powerful supercomputer may be needed to achieve its goal. This week, he said the current hardware can reach “approximately human-level autonomy”.
Musk concedes that the system will probably need to be significantly safer than the average human driver in order to achieve regulatory approval, so a hardware upgrade may be necessary. But customers have already paid for this function, so the company is offering a swap with the less ambitious Enhanced Autopilot. But even the Enhanced Autopilot is awaiting an upgrade which is still months away.
Tesla Semi Truck
Tesla was set to unveil its first all-electric long-range semi truck back in September. Then it was moved to October. Then it was pushed until November 16, explicitly so that resources could be diverted to deal with Model 3 problems.
The Tesla Network
Tesla is working on a system that will allow owners to rent out their cars using what they’ve dubbed the Tesla Network. Once fully autonomous driving is achieved, the idea is that fleets of privately-owned Teslas will function like a driverless Uber or Lyft, picking up and delivering passengers for a fee that will be shared between Tesla and the individual car owners.
The Tesla Network, which accounts for billions of dollars in long-term revenue in many analyst models, is supposed to be unveiled this year. With all of the bigger delays drawing the attention, it seems incredible that Tesla Network will be up and running any time soon.
Disclaimer
This article was issued by Antoine Briffa, investment manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.