Problems piling up for Elon Musk
Just what is happening at Tesla? Last week the company’s share price fell 5% in after-hours trading following a conference call between Musk and financial analysts during which he called one of them a “boring bonehead.” The analysts were asking questions about Tesla’s record net loss in the first quarter of this year. The company recorded a net loss of $710 million and spent $745.4 million in cash in this period.
This is only the latest in a series of setbacks which have bedevilled the electric car maker in recent months. Production of the company’s Model 3 saloon has been temporarily suspended twice in the last couple of months and Musk is now apparently sleeping in his California assembly plant in an attempt to resolve the issues which have seen Tesla miss its targets repeatedly.
Musk had promised to build 5.000 Model 3’s a week but actual production is now around the 2.000 mark. Meanwhile, some half a million customers have prepaid reservations for the car, a vehicle which might not be delivered to them until some time next year.
Oddly, Musk has blamed excessive automation as one of the reasons for Tesla’s problems, stating that, in his view, automation is “overrated” and that more humans are required to build the cars. This seems to fly in the face of accepted wisdom that increased use of robotics is the way forward for vehicle production. Could it be that robots are incapable of the flexibility required to overcome production difficulties, particularly in new, or newish, models?
A recent report from a US company which disassembles new cars and analyses them praised the Tesla Model 3 for its battery pack and electronics but heavily criticised its build quality. In particular, the fact that body panels, eight or ten of them all welded together, merely create extra weight and have gaps between them.
Shareholders are apparently unhappy that production of Tesla’s new and more affordable Model Y SUV which was scheduled for next year has now been postponed until 2020. Shareholders are, of course, people who must be kept satisfied if a company’s future is to be guaranteed. Elon Musk has stated that Tesla’s difficulties are only temporary and that the company will return to a positive cash flow in quarter three of this year. Tellingly though, he also stated that this was “not a certainty.” If there is one thing that investors don’t like it is uncertainty and there seems to be plenty of it surrounding Tesla right now.
Simon Duval Smith
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