And So It Begins – Tesla’s Slide Back To Reality


The idea that Tesla was going to propel itself through into a full on mass manufacturing car producer was always a bit of a fairy tale. Sure, it could have happened, after all, history shows that some have done it simply because we do in fact have full on mass manufacturing car companies. But not many of those who have tried have succeeded and many of those which have were conquering virgin territory. Still, it was possible to hope.

And yet, and yet, there was always something screwy about said hope. Leading to the question, well, when are the wheels going to come off? That might be what we’re seeing here:

Tesla delivered 63,000 cars in the first quarter of this year, well below analysts’ expectations, and warned that its income would be “negatively impacted”. The electric car company had been expected to deliver 76,000 cars, but instead delivered 50,900 Model 3s and 12,100 Model S and X cars. Some fall in demand had been anticipated because of the end of a federal tax credit in the US, and sales were already falling for the company’s higher-end cars. “Because of the lower than expected delivery volumes and several pricing adjustments, we expect Q1 net income to be negatively impacted. Even so, we ended the quarter with sufficient cash on hand,” the company said.

Hey, maybe it is the end of that tax break. Or perhaps this is a better analysis:

Demand for Tesla cars in the US has fallen substantially in the first 2 months of this quarter. Musk liked to portray the huge Model 3 sales ramp in 3Q18 and 4Q18 as the start of an S-curve, but now those quarters look more like a one-time bulge as Tesla blew through over 2 years in orders in just a few months. Aggressive pull-forwards of demand by Tesla in the fourth quarter as well as the reduction in US and Dutch EV subsidies have also hurt.

Or this maybe:

A 6 percent price cut by an ostensibly demand constrained growth company is bad enough. 8-30 percent price cuts is Armageddon time. As I noted in yesterday’s post, this is a sign of a truly desperate company. Or maybe a completely delusional one. Because anyone in their right mind would know that price cuts–especially of this magnitude, and especially on what should be the most profitable vehicles–vaporize customer goodwill. Especially the goodwill of the type of customers who are vital to making the company profitable by buying the high margin vehicles. You only do that if you are so desperate for cash today that you say f-the-future, it will have to take care of itself: if I don’t get cash today, I won’t have to worry about the future.

No, I don’t know either. But I’d not be putting my money anywhere near the company. Either way as an investment and not even putting down a small deposit against a car that it’s not obvious will arrive.

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Quentin Vole
Quentin Vole

Everyone who could usefully own a Tesla – essentially that’s wealthy virtue signallers, together with those who run several cars, including £100k supercars – has already got one.

Tim Almond
Tim Almond

also, they look like nothing. You see a model 3, it looks like a Hyundai. Nothing wrong with a Hyundai, but it doesn’t signal you spent £35K on a car.