THE CAR OF THE FUTURE, FOR NOW: Elon Musk’s goals appear less realistic as Tesla again downshifts plans for its Model 3, reveals slowdown in older models.
Tesla burned through a record amount of cash during the period—some $1.4 billion. That is disconcerting, but investors’ emphasis has been on the future with this company. Developments during the quarter make CEO Elon Musk’s vision look more and more like a pipe dream. For starters, Tesla said it would build 10% fewer Model S and X vehicles in the fourth quarter than the third quarter—a worrying sign on future demand for its more expensive, higher margin products.
The outlook is even worse for the Model 3, the mass-market model that Tesla has struggled to build. It now expects to produce 5,000 a week by the first quarter of next year, another slippage in its timeline. And Tesla seemed to hint that key equipment to produce even more Model 3s hasn’t yet been installed, noting “it has always been our intention to implement that capacity addition after we have achieved a 5,000 per week run rate.” Its ultimate target is twice as many. Given Tesla’s long history of questionable forecasts, investors should take a dim view of even these lowered expectations.
As of August, more than 10% of Model 3 preorders had been cancelled. And that was before the new car’s manufacturing delays had come to light. Eventually the company is going to have to start delivering cars or refunding many more $1,000 deposits.
Reportedly, even the refund process is experiencing serious delays.