Queue Starfcker in 5,4,3,2,1….. to tell us all how this is part of Musk’s master plan to rule the world. It’s just another tiny hiccup. Last year at this time he proclaimed he would be producing 200,000 Model 3s in the second half of 2017. Instead, he will make less than 5,000. What a genius!!! Buy the dip!!!
Tesla Inc. warned it will take months longer than expected to reach its goal of making 5,000 Model 3 sedans a week, a significant delay that could put additional pressure on Chief Executive Elon Musk’s limited cash pile.
The Silicon Valley electric-car maker had aimed to hit that production threshold by the end of this year, but said on Wednesday it won’t reach the milestone until late in the first quarter of next year.
Tesla also reported its worst financial quarter ever, posting a loss of $619 million attributed to common shareholders in the three months that ended on Sept. 30, compared with a rare profit of $22 million a year ago. On an adjusted basis, the company’s per-share loss of $2.92 was wider than the $2.28 consensus estimate of analysts surveyed by Thomson Reuters.
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The company attributed the primary delay of ramping up the Model 3, which began production in July, to battery-pack assembly at its factory near Reno, Nev.
“The combined complexity of module design and its automated manufacturing process has taken this line longer to ramp than expected,” Mr. Musk said in a shareholder letter detailing the company’s third quarter.
Expectations for the Model 3, which starts at $35,000, have helped push Tesla’s shares up more than 50% this year, giving it a market value that rivals General Motors Co. despite Tesla having never turned an annual profit nor built more than 84,000 vehicles in a year.
Mr. Musk’s ability to defy the odds by making Tesla into a global luxury brand is being tested anew with the Model 3, a midprice sedan that he hopes will move the company more into the mainstream. A year ago, Mr. Musk was suggesting that Tesla would begin volume production of the four-door car in July of this year and make, perhaps, as many as 200,000 units in the second half of 2017. In regulatory filings in March, Tesla was promising 500,000 vehicles in 2018, including the Model 3, Model X and Model S sedan.
But as the deadline to start assembly grew closer this year, Mr. Musk’s publicly stated goals began to diminish to the point of him warning in July that Tesla faced six months of manufacturing “hell.”
He predicted making more than 1,500 Model 3s in the third quarter and reaching 5,000 a week by year’s end and 10,000 a week sometime in 2018.
Last month, Tesla surprised investors with disappointing news: It badly missed the third-quarter production target, making just 260 Model 3s. The auto maker attributed the miss to an unspecified production bottleneck while saying there are “no fundamental issues” with the car’s production or supply chain.
The Wall Street Journal has reported that Tesla’s body shop wasn’t ready when production began and that workers were hand-making portions of the Model 3 as recently as early September.
On Wednesday, Tesla said some parts of the car factory have been able to demonstrate an ability to make more than 1,000 units per week “during burst builds of short duration” while others have demonstrated burst builds of 500 units per week.
Social-media posts by Mr. Musk in recent days also suggested issues at the battery factory near Reno. He posted a picture of himself at a campfire on the factory’s roof at night along with a video of himself apparently drinking whiskey, roasting a marshmallow and signing a Johnny Cash song.
He later followed with another social-media posting to say that he was camping on the roof “because it was less time than driving to a hotel room in Reno” and noted “production hell.”
A little more than a year ago, the average analysts surveyed by FactSet were predicting Tesla would turn a profit during the third quarter, but those forecasts grew cloudier as time went on.
Now, Mr. Musk finds himself in a familiar situation: running low on cash amid a make-or-break effort to push out a new car.
If he is successful, money will flow in and all the hiccups will be mostly forgotten. Two years ago, Tesla was struggling to ramp up production of the Model X, another troubled period in the company’s short history. The company has since fixed those problems and sales have surged.
A 36% gain in sales of Tesla’s Model X sport-utility vehicle during the latest quarter helped boost revenue 30% to $2.98 billion from $2.3 billion a year earlier. The results exceeded the $2.95 billion expected by analysts.
Mr. Musk took steps in the third quarter to boost his cash pile, issuing $1.8 billion in bonds. But starting production on a new vehicle is expensive, and he ended the period with $3.5 billion in cash — $500 million more than at the end of the second quarter.
“The cash burn situation looks horrible right now but should improve in 2018 once Model 3 gets to bigger volumes,” said David Whiston, an analyst for Morningstar Research Services.
Tesla said on Wednesday it plans $1 billion in capital expenditures during the fourth quarter after spending $1.1 billion in the third quarter, for a total slightly more than the $2 billion planned during the second half as detailed at the end of the second quarter.
Tesla has suggested it needs a minimum of $1 billion each quarter for working capital. The company has about $1.4 billion in debt due by the end of next year and has talked about plans for new factories in Europe and China.
“Between cash on hand, future cash flows and available lines of credit, we believe that we are well capitalized to accommodate the revised ramp of Model 3 production to 5,000 per week,” Mr. Musk wrote. “Upon achieving this production level, we expect to generate significant cash flows from operating activities.”
Since going public in mid-2010, Tesla has burned through $9.8 billion in cash, putting it on pace to spend through more than $10 billion by year-end.
That is a rare feat, according to an analysis this fall by Bernstein Research analyst Toni Sacconaghi. Tesla “appears to be the largest public company in history to have never generated either positive annual cash flow or positive annual profit, unlike peers who had historically proven financial models and were generating positive net income through their growth phases,” he wrote in the report.
Be interesting to know what that “production bottleneck” actually is.
Maybe it is just a simple body parts problem as the WSJ is suggesting, or maybe something more fundamental to the nature of the vehicle. The former should be fixed quickly, the latter may be a little more difficult and take quite a bit longer.
Anon….I’ll go with the ‘fundamental’ since Tesla is bleeding cash in the Billions.
It’s the bundling of the batteries at the gigafactory in Nevada. Supposedly it has required Tesla to completely re-engineer the robots that put the battery packs together
I now work with a guy who was the project manager for the automation company that built the system which puts the packs together. He told it to me this way: Tesla had ordered equipment to assemble battery packs at some given rate. After the equipment was installed, up and running, Tesla decided it needed that rate to increase by some multiple. New contracts were agreed to, and the equipment had to undergo major changes, including new robotics that could handle increased speeds. In the course of install and troubleshooting, Tesla stopped paying the automation company on whatever payment schedule they had agreed to. No reason given. At one point, one of the Tesla executives told the automation company that “working with Tesla should be payment enough”. So, the automation company ordered it’s engineers and technicians to walk off the job.
I’d like to duct tape Musk / Gates / Hawking / Bezos / Zuckerberg to one of Musk’s rockets, for a one way trip to Mars.
Eric Peters will be dancing on their grave in a vintage 70’s Dodge Dart.
Maybe doing donuts in the cemetery? Yee Haw!
Hot maybe after a dozen beers.
“…we believe that we are well capitalized…”
Deja Vu
July 15, 2008, Hank Paulson did concede that even though he believes the firms (Fannie Mae and Freddie Mac) are well capitalized,
All is A-OK, /sarc
Goldman Throws Up On Tesla Earnings: Reiterates Sell, Cuts Price Target To 36% As Stock Tumbles
by Tyler Durden
Nov 2, 2017 9:36 AM
One day after Tesla announced its worst quarter in history, in which it burned a record $1.4 billion in cash…
… Goldman has guaranteed it will not be an underwriter on the next Tesla stock offering – which at the current cash burn will take place in less than 2 quarter – by reiterating its Sell rating on Tesla, and cutting its Price Target to $205, or 36% downside. Here is the summary from Goldman’s David Tamberrino who once again unapologetically throws up all over the latest TSLA earnings:
We reiterate our Sell rating on shares of TSLA. We believe the stock should continue to de-rate following 3Q17 results where the company further pushed out its Model 3 production targets for 5k/week to late 1Q18. We believe this further pushes out the potential to ramp to 10k/week production of the Model 3 to at least 2019 (though we continue to model a ramp well below both); this should weigh on gross margins through at least 1Q18 and we do not expect a return to above 20% Automotive gross margin levels until 2H18. Altogether, we believe this indicates that the company’s goal for positive OCF generation should remain elusive until the middle of 2018 — though we still forecast significant FCF burn. On that front, we now believe TSLA will need to raise capital sooner (2Q18 vs. 3Q18 previously). Lastly, we believe the company’s comments on potential China production (3 years out) will be disappointing to investors, which have been confident in TSLA entering the China market with local production in the next one to two years. Our 6-month price target declines to $205, showing 36% downside.
Too lazy to do that.
There’s a grocery store about 40 miles from where I live with a dozen Tesla designated parking spots to plug-in while you shop. I asked a worker how often it gets used. He said nobody had ever seen it used.
Peter M. DeLorenzo at Autoextremist.com has been forecasting Tesla’s decline/demise for years. The Silicon Valley whiz kids have no idea how difficult it is to design/build/certify/market cars on a mass scale even with massive government subsidies…….. but some of them may be starting to get a clue.
I’ve asked this question before, but unless Elon Musk reads TBP I doubt if I get an answer.
If you lose $10K on each $100,000 car you make. How are you going to make money when you make a car that cost 1/3 of that amount?
Who is going to be the smart ass that says: you make it up on volume.
Trapped. In this case, you are clueless. Never give up your day job. Tesla is a rapidly expanding company. They have spent a ton of money in the last couple of years building a giant factory to build their batteries, and another one to build the mass-produced model 3. No income is currently coming in from either one of those sources, it is all expenditure. If you take that amount of spending, which has nothing to do with their car production line, and divided by the number of cars that they sell from their limited production Model S and model X lines, you can come up with the statistic that they lose money on every car that they make. But that would be bullshit, and evidently you don’t have enough information. I can’t remember who posted the question, but try to answer this. How much does the first bar of soap from a new 10 million dollar factory cost?
Starfcker, how can you type with your head so far up your ass. You must be a touch typist.
Tesla doesn’t have a marginal cost problem (first bar of soap in a $10M factory), they are producing a product that costs far more than the price people will buy it for. Kinda like Proctor and Gamble making bars of soap that consistently costs them $10 each to produce but for which consumers will only pay $1.50 for.
Tesla is running out of time. They have never made a dime on any car they’ve sold. Any money they have made is due to selling clean vehicle credits. With federal tax credit for electric cars probably disappearing and the middle class also disappearing, few people will be able to or want to buy a $35,000 Model 3 Tesla that is nothing more than a status symbol.
Tesla is like many companies who were first in a new industry. In other words they fail and disappear as the industry matures. My money is on Mercedes and BMW to make electric cars that actually cost less to build then the sales price.
Eventually the fad will end and Tesla will take its place in the dustbin containing Delorean, Studebaker, Packard,…etc
Tesla Drops After Republican Says Tax Bill Will Repeal Electric Car Credits
By Craig Trudell
November 2, 2017, 11:13 AM EDT
Tesla Inc. shares extended declines after a House Republican said the U.S. tax bill being introduced Thursday would repeal credits given to electric-vehicle buyers.
The stock plunged as much as 8.9 percent to $292.63, the lowest intraday since May 4. Mike Bishop, a Michigan Republican on the House Ways and Means Committee, told reporters his assumption was that the credits would be phased out immediately.
The tax credits for as much as $7,500 per electric vehicle purchased are capped for each car manufacturer at 200,000 units, a limit no automaker has reached thus far. Tesla sold about 127,000 Model S sedans and Model X sport utility vehicles through August, according to researcher IHS Markit.
Shares of the carmaker run by Elon Musk opened lower Thursday after the company delayed production targets for its Model 3 sedan and posted a record quarterly loss.
Elon Musk is nothing but a scam artist making most of his money off of government subsidies, he did this with his solar roof company and now his car company.