Ihab Salloum[ad_1]
In February Elon Musk launched a Tesla electric sports car into space on the powerful new Falcon Heavy rocket, and Tesla also reported its fourth quarter earnings, which narrowly beat analyst estimates. The company’s revenue rose to $3.288 billion, from $2.284 billion a year ago. Both of these events demonstrate Tesla’s potential and sheer audacity. Yet, these headline grabbing events don’t change the fact that the company is hemorrhaging red ink, losing $1.9 billion for full year 2017, and those loses will increase even further in 2018.
Additionally, during their earnings conference call, company officials tried to tamp down expectations for 2018, citing battery supply constraints and production delays at their new state-of-the-art Gigafactory. The Tesla Gigafactory, still partially under construction, is located near the unincorporated community of Clark, Nevada, in northern Storey County, about 17 miles east of Reno. Construction on the facility is expected to be completed by 2020.
According to David Trainer the CEO of New Constructs, an equity research firm, Tesla has been plagued by production problems from the very beginning, from its first car, the Roadster to the current Model 3. The Roadster actually used an AC motor originally designed in 1882 by Nikola Tesla himself. Additionally, Trainer wrote in a recent article that the Model 3 production problems also led to the delay of the debut of Tesla’s first commercial vehicle, the new electric semi-truck. Further, Trainer points out that while Tesla promises the moon and even Mars, the company continues to struggle with basic manufacturing and production. Tesla’s main vehicle manufacturing facility is in Fremont, California.
Moreover, Tesla’s troublesome production delays aren’t occurring in a vacuum. There is increasing competition in the electric vehicles (EV) arena. The Chevy Bolt outsold all Tesla models combined last October, and Chevy delivered over 23,000 Bolts in 2017. Tesla clearly needs to fix its production issues, or some on its long waiting list of EV customers may abandon it for more easily accessible options. Tesla quickly racked up 373,000 pre-orders for the Model 3, charging $1,000 just to get on the waiting list.
Nevertheless, Tesla, based in Palo Alto, California, does have strong enthusiasts, and also is now listed, as of 2017, on Statista’s Top 10 Most Valuable Brands within the automotive sector worldwide. Tesla made it into the ranking for the first time last year, and the Tesla brand alone is valued at $5.88 billion. By comparison, Toyota was ranked as the world’s most valuable car brand in 2017, with a brand value of $23.5 billion. Tesla also produced its 300,000th vehicle in February 2018. Plus Tesla’s new heavy-duty electric truck is truly a potential game changer. The electric trucks made their “first production cargo trip,” transporting battery packs from Tesla’s Gigafactory in Nevada to the company’s car-assembly factory in Fremont on Wednesday, March 7th. Tesla is currently considered to be a niche, luxury car maker, and not a commercial truck producer.
Nevertheless, when Tesla first unveiled its sleek electric semi-truck in November, and announced that they were entering the $719 billion freight shipping industry, the news immediately generated enthusiasm for the electric truck, which will have a range of 500 miles per charge, and can accelerate from 0-60 mph in five seconds. Although full production isn’t expected to begin until 2019, companies are already placing orders for the electric big rig. Walmart, Meijer, a Michigan-based supermarket chain, J.B. Hunt Transport Services, Pepsi, and Anheuser-Busch have all placed orders for the Tesla Semi, putting down a $5,000 deposit for each truck, according to CNN Money. The electric truck will most likely be used for short hauls, but the Tesla Semi is likely to make some waves in the industry, CNN Money’s auto guru Peter Valdes-Dapena pointed out.
Moreover, some extreme enthusiasts say Tesla is the next Apple Inc. However, Apple is not plagued by the constant production headaches that Tesla can’t seem to overcome. One of Tesla’s key production concerns is limited battery availability. Panasonic currently produces the batteries for Tesla automobiles. But the battery currently being produced is an older technology and there are likely no other automobile volume buyers for this technology except Tesla. And for that reason Panasonic likely does not want to expand production capacity of that battery, especially since Tesla plans to switch to a new battery sometime in the second half of 2018, according to a Seeking Alpha article. Moreover, these problematic capacity issues and production delays have caused Tesla’s operating expenses to skyrocket.
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