Tesla, the upstart that has defied the unwritten rules of the auto industry, is finishing up a year in which the challenges of manufacturing a mass-market electric car in large quantities finally hit home.
After years of bragging about its advanced manufacturing techniques, the Silicon Valley automaker faces a reality check when it comes to making its first mass-market car, the Model 3 electric sedan.
With output failing by a wide margin to meet Musk’s promise of 5,000 vehicles per week by the end of December, Tesla could be facing a make-or-break 2018 The new year may determine whether the company will need to again go hunting for cash and whether it maintains its leadership position in electric vehicles.
Speeding the rollout of the Model 3, which at about $35,000 will be roughly half the starting price of Tesla’s luxury models, is essential to company’s financial health. Reason: Tesla lost several million dollars per day in the third quarter in its rush to begin manufacturing.
“Is this the year investors will say, ‘Enough’s enough,’ or will they continue to fund Tesla?” Autotrader.com analyst Michelle Krebs said. “That’s the big question. I suspect investors would continue funding them if they see progress on the Model 3.”
So far, investor enthusiasm remains high. Tesla passed General Motors as the most valuable automaker in the U.S., as measured by stock price and shares outstanding, in April. Tesla shares sailed to an interday high of $389.61 in September and have since settled back 25% to about $312 in midday trading Wednesday.
At present, Tesla is valued at $52.5 billion, less than GM but more than Ford. Tesla sold 40,320 cars and SUVs in the first 11 months of the year, says sales tracker Autodata. Ford sold 2.3 million over the same period.
Now Tesla’s main focus is on the Model 3, which will require successfully exiting what CEO Elon Musk has called “production hell.” The problems are in stark contrast to the successes that the company has scored in producing two luxury electric-vehicle models, defying the conventional auto industry in the process, and selling cars direct to the public rather than through dealers.
Tesla, which declined an interview request, has denied reports that workers at the automaker’s Fremont, Calif. factory were assembling some parts by hand at one point. But Tesla did acknowledge it hit significant “bottlenecks” in production and Musk said that at one point he was “really depressed” about it.
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Photo – Model 3 units ready for delivery at Tesla’s first delivery event in July (USA Today)
