Can Tesla overcome its various controversies while achieving its sales goals? We’re about to find out.
Tesla is set to announce the number of cars produced and delivered to customers for the third quarter early next week.
Three months prior, both investors and Tesla enthusiasts were eager to see if the company could fulfill its ambitious target of manufacturing 5,000 Model 3 vehicles per week. It successfully reached that goal, producing 5,031 vehicles in the final week of June.
Industry experts assert that the upcoming report on third-quarter production is crucial for Tesla’s future. It will provide insight into whether the production spike at the end of the second quarter was temporary or sustainable.
“The significance of maintaining production levels far outweighs a single week’s production surge,” noted Jeremy Acevedo, industry analysis manager at Edmunds. “The contrast between 5,000 per week and 20,000 per month is monumental.”
More critically, the report will reveal if Tesla (TSLA) is on course to fulfill CEO Elon Musk’s commitments that the company would achieve profitability in the third and fourth quarters. Historically, Tesla has only recorded two minimally profitable quarters as a publicly traded entity and suffered its largest loss in the second quarter while ramping up production.
The financial struggles, along with over $1 billion in debt that Tesla will need to address by next spring, have prompted some analysts to mention the risk of a cash crunch that could necessitate selling additional shares for cash. This could be complicated by the falling stock value and Musk’s federal lawsuit for allegedly misleading investors.
Musk has maintained that Tesla will not require additional cash because increased production will lead to higher revenue. However, he has also acknowledged that the company is facing challenges with delivering the cars it has built.
“Apologies, we’ve transitioned from production hell to delivery logistics hell,” Musk stated in a tweet two weeks ago, assuring that, “We’re making rapid progress. Should be resolved soon.”
Unsurprisingly, customers awaiting their Teslas are not paying for the eagerly awaited vehicles until they are delivered. Thus, the logistical challenges could pose a significant concern for the company’s revenue.
“The current delivery chaos is quite troubling,” remarked Rebecca Lindland, an analyst with Cox Automotive.
While some Tesla enthusiasts may focus solely on the production figures, she emphasized the importance of considering both production and delivery numbers.
Tesla’s most pivotal report has been overshadowed by various controversies.
In August, Musk tweeted his intention to take the company private at $420 per share, claiming he had “funding secured”. Although some investors showed interest, the SEC found that nothing was guaranteed. By the end of the month, he abandoned the plan to go private, but by then he was already facing lawsuits from shareholders alleging that the tweet was a manipulative tactic to influence stock prices. Subsequently, the SEC filed a lawsuit against Musk, seeking to bar him from serving as an officer at Tesla or any other public company.
To add to the mix, Musk has shared stories about his lack of sleep and smoking marijuana during a podcast, along with his other company SpaceX offering a lunar trip for a billionaire tourist, making it easy to overlook that a significant measure of success lies in how many cars can actually be produced and sold.
CNNMoney (New York) First published September 28, 2018: 3:47 PM ET
