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For Tesla Motor Company, Dips Don’t Lie – Especially When the Dips Keep Coming

tesla electric car

The Tesla Motor Company has certainly had its share of ups and downs over the years. Its financial projections (and infusions) are about as erratic as Elon Musk’s Twitter rants. So, it might not be too surprising that once again Tesla Motor Company’s first quarter numbers are quite disappointing. But is this simply another blip on the radar? Or is this the beginning of the ultimate downfall of the Tesla electric car?

It’s a question worth considering, given all the challenges the Tesla Motor Company is currently facing. The company has its share of internal issues, especially with logistics right now. But at the same time, many of its largest obstacles appear to be coming from elsewhere. And as the surrounding automotive industry environment changes, one has to wonder if first-quarter figures are a telltale sign.

A Year Tesla Would Thus Far Like to Forget

The report for the first quarter numbers for Tesla wasn’t favorable. In fact, they were downright dismal. The first quarter sales were a mere $63,000, which would suggest an annual projection of around $250,000. The problem is Tesla electric car sales were supposed to hit between $360,000 and $400,000 this year. Likewise, this is a big disappointment for investors who saw an actual profit for the company in the last two quarters. In contrast, this quarter brought a $702,000 loss, which is much tougher to swallow.

Thus far, the numbers for the second quarter aren’t looking very favorable either, based on available data. Sales for Tesla in the Netherlands and Norway have dropped 76% and 82% respectively between March and April. And despite promoting its Model 3 as the car for the masses, the Tesla electric car workforce was cut by 7% in January. For a company that burns through cash at $7,000 a minute, these are not favorable signs. And despite having a reported $2.2 billion in cash reserves, it seems clear that there is a need for additional capital.

tesla electric car, jeffrey osborne quoted
Apparently, the Tesla Motor Company could use some cash.

Cloud and Mirrors Can No Longer Hide a Changing Landscape for Tesla

For a long time, the hype surrounding the Tesla electric car fueled investor enthusiasm. As Tesla Motor Company leveraged its expertise and experience to gain market advantages, everyone was optimistic. But repeated failures and missed predictions have investors and analysts alike looking at things afresh. While Elon Musk still demands attention and professes a remarkable future, some realities must be considered. Certainly, the financials paint a troubling picture. But combine these with a factual reality of the automotive sector today, and Tesla investors should be really concerned.

  • A Dissipating Lead in Technology for Tesla Electric Cars – For years, Tesla was able to surpass many of the “big boys” in electric vehicles simply because of its expertise. High performance was combined with luxury and advanced battery technology. The Tesla Motor Company clearly stood alone. But times have changed. Nearly every automobile manufacturer has an electric vehicle, either in current production or soon to be released. And several companies have either partnered or acquired technology innovators in this field. The Tesla electric car is no longer the only high-end, luxury electric vehicle on the market. And recent sales declines, particularly in Norway and the Netherlands, support this.
  • Trouble Playing by the Rules – It’s no secret that Elon Musk has trouble keeping his emotions in check. As Twitter rants have proven, such indiscretions have major repercussions. Musk’s skirmish with the Securities and Exchange Commission resulted in $67 million in restructuring costs and fines for Tesla Motor Company. And if that wasn’t bad enough, the recent reduced federal tax credit for EV’s has contributed to declining demand. By taking away the tax incentive, fewer Americans are as excited about purchasing a Tesla electric car. Though perhaps not as important as other areas, the inability to successfully negotiate regulatory environments isn’t helping.
  • Repeated Strategic Fails for Tesla Motor Company – When Tesla electric cars were first launched, their innovative strategy was refreshing. Online sales, few brick-and-mortar showrooms, personalized service, and seamless technology updates were all highly attractive. The environmental appeal, the high-end luxury, and the inherent prestige of owning a Tesla electric car also contributed. But recently, the strategy has not been as innovative. For one, Elon Musk’s hype of future releases, and the opportunity to pre-order, have been detrimental. Consumers can now preorder the Tesla Model X crossover for a 2021 delivery. But this naturally detracts from current sales of the Model 3, which are desperately needed. These types of strategic decisions, in addition to failed logistics and manufacturing mishaps, have plagued Tesla Motor Company as of late.
  • Advancing and Formidable Competition – As noted, existing competitors present in the automobile sector have rapidly caught up in technology. Tesla Motor Company does not enjoy the same advantages as they once did. But new companies are surpassing Tesla’s numbers as well. For example, China’s largest EV company, BYD, actually sold more electric cars in the first quarter than Tesla Motor Company did. And BYD’s profits have advanced 632% in the first quarter compared to the same time period last year. GM and Ford sell roughly 10 times the volume of cars like Tesla. And both Audi and Jaguar EVs are outselling the Tesla electric car in the Netherlands by a factor of 10. There’s no question that the incumbents have caught up while new entrants have appeared.
  • False Hopes of Being an Autonomous Vehicle Leader – Elon Musk is a visionary, even if all his visions may not come to fruition. But when the vision impacts current day success, that is a problem. Recently, Elon Musk has suggested that Tesla Motor Company will launch autonomous robo-cars and will be an autonomous transportation leader. But is that a reality? A number of players are already investing heavily in autonomous transportation. And many are heavyweights in the field. If Tesla Motor Company is investing heavily in this direction, its current objectives for the Tesla electric car will likely suffer. This is where a dose of reality might truly be helpful.
Daniel Ives - Managing Director for Wedbush Securities
The numbers don’t lie: things aren’t all roses with the Tesla Motor Company.

Predicting the Future for Tesla Motor Company

Recent performance figures are not attractive for Tesla Motor Company. But that does not mean the gloom and doom for Elon Musk’s electric car company are imminent. Cash reserves are available, and another round of capital funding will likely be successful to keep Tesla going. But the signs don’t look favorable for the long-term. A combination of internal problems and an increasingly hostile environment pose serious threats to the Tesla Motor Company. No matter what, win or lose, Tesla’s story will be an interesting one. Elon Musk will make sure of that.

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