Elon Musk has proven to his biggest critics, time and time again, that he always finds a way to put his ambitions to work – no matter how crazy or ludicrous they may sound to everyone else.
Musk’s brainchild Tesla has had a rollercoaster of a ride so far with production delays that have haunted almost every new car launch and made investors skeptical about how this newcomer in the automobile industry will stack up against more seasoned players like General Motors.
2017 was a tumultuous year for Tesla but experts say that 2018 may present a new set of challenges for the company. Does Musk have a new trick up his sleeve to save Tesla’s plunging stocks after the model 3 production delays left customers impatient and unenthusiastic?
So far, the carmaker has challenged some of the most formidable players in the industry in market capitalization
Tesla may run out of money before the end of 2018
Elon Musk wants to make cheaper sportscar for us, but the company itself is on the verge of running out of money due to high fixed costs and very little revenue. The carmaker has challenged some of the most formidable players in the industry in market capitalization, but in comparison to automobile giants like General Motors, FCA and Ford, Tesla has very little cash left – a pitiful $3 billion to be exact – and considering the billion of dollars the company churns through each year, Tesla may not be able to make it through 2018 on its own.
It’s not that the company has higher manufacturing costs in comparison to its peers since GM also spends billions of dollars on production each year. But where other carmakers in the auto industry are able to sell millions of vehicles worldwide, Tesla only manages to produce a small fraction of that – that too with a delay.
The carmaker has already raised capital twice so far but its financial troubles are far from over. Critics have already begun questioning the company’s execution on the production front and if Tesla does another equity raise it will only make people more skeptic about its ability to perform in the industry.
Slow production – who’s to blame?
Elon Musk blamed for the Model 3’s production delay the hold-up on bottlenecks in Gigafactory, which is the automaker’s battery plant
The nightmare with Model 3’s production delay may also haunt the company in 2018. Even though Elon Musk blamed the hold-up on bottlenecks in Gigafactory, the automaker’s battery plant in Nevada, experts are speculating that the real reason why Tesla is failing to meet the production demand is the limited manufacturing capacity of its factory in Fremont.
Even when the plant was jointly used by GM and Toyota, the production topped out at 400,000 automobiles. Now, Musk is promising to roll out 500,000 cars from the production line of the same factory in 2018, but with its current predicament, this seems highly unlikely.
Once Tesla has found a way to not run out of money, fixing its Fremont factory should come next on its list of priorities if it ever wants to be taken seriously in the industry.
Overpromising but underdelivering
Fixing its Fremont factory should come next on Tesla’s list of priorities if it ever wants to be taken seriously in the industry.
Elon Musk knows how to distract the public and investors from Tesla’s fatal flaws by frequently staging new product reveals and promising more than the company’s capacity to deliver. This isn’t a bad strategy to bring in cash from pre-order deposits and keep the enthusiasm of Tesla loyalists from dying. The product reveals are also perfectly timed to bring its falling stock prices back up.
However, the product reveal extravaganza has been in full gear lately with the recent unveiling of the revamped Roadster and the company’s first ever Semitrailer. Two more epic shows are also on their way as Musk promises to reveal Model Y and a pickup truck in 2018. Meanwhile, the company is struggling to be on delivery schedule for only one of its mid-sized sedan.
It’s obvious that Tesla wants to bring in more cash deposits to fuel its operations but will it be able to deliver on its promises that are piling up quickly? Only time will tell…
