Tesla 3Q production numbers up but can they be sustained?

It produced 26,903 Model S and X vehicles. That’s slightly better than its second-quarter performance and in line with its full-year guidance. The company’s target of 100,000 Model S and X deliveries in 2018 remains unchanged.

“Today’s production announcement offers a bit of redemption to the Tesla faithful,” said Jeremy Acevedo, Edmunds manager of industry analysis, in an email. “It’s refreshing to see the company making headlines for producing cars, not controversies.”

Indeed, the controversies abound for Tesla. Just last week, Musk cleared a dark cloud hanging over the company when he agreed to settle a Securities and Exchange Commission case alleging he had misled investors by declaring he had lined up the financing to take Tesla private. The SEC wanted to oust Musk as CEO as punishment. Musk is staying on as CEO, but giving up his chairmanship. Musk and Tesla will each pay $20 million to resolve the case.

The production increases are something Musk worked nearly to exhaustion to achieve. He has publicly said he has been working as much as 120 hours per week and sometimes even slept on Tesla’s factory floor in Fremont, California, to oversee the efforts to make more cars. The company even built a heavy-duty tent to add space to make more Model 3s.

But doubts remain whether the company can continue to crank out enough vehicles to achieve profitability, something that still eludes Tesla.

“Going forward, it doesn’t prove much,” said Erik Gordon, a professor at the University of Michigan Ross School of Business. “They’re still producing in a tent, they’re still producing the numbers by working crazy hours, with crazy cheerleading by Musk…It’s sort of this insane carnival.”

Added Acevedo: “While Tesla superfans and owners have generously volunteered their time to assist, this isn’t necessarily a sustainable model that Elon can count on moving forward.”

Tesla has never turned an annual profit during its eight-year history and rarely done it on a quarterly basis, but it needs to reverse that trend to erase doubts about its survival.

The company has been under mounting pressure to stop burning through cash with $1.3 billion of its more than $10 billion in debt due to be repaid during the next six months.

In a Sept. 30 email, filed with the U.S. Securities and Exchange Commission on Monday, Musk said the electric car maker is nearing profitability.

“We are very close to achieving profitability and proving the naysayers wrong, but, to be certain, we must execute really well tomorrow,” the last day of the quarter, Musk said. “If we go all out tomorrow, we will achieve an epic victory beyond all expectations. Go Tesla!!!”

Investors on Tuesday seemed to latch onto Tesla’s prospects for profitability. Shares were down 3 per cent to $307.66 in late-morning trading.

Other problems plague Tesla. Although it successfully reached its production goals for the third quarter, getting those vehicles into the hands of consumers has proven to be a headache.

Tesla delivered 83,500 vehicles in the third quarter, which is more than 80 per cent of the vehicles that it delivered all of last year.

But customers have been complaining that their Tesla delivery dates have been delayed over and over while vehicles sit unmoved in lots. One tweeted to Musk last month: “There are 42 Tesla’s sitting at the Union Pacific Railroad in SLC. My car is one of these. I’ve been told I was getting delivery the 8th, then the 15th, then the 20th, then the 22nd, and now my delivery has been delayed indefinite. @Tesla @elonmusk… Please make this right.”

Musk tweeted back and acknowledged the problem: “Sorry, we’ve gone from production hell to delivery logistics hell, but this problem is far more tractable. We’re making rapid progress. Should be solved shortly.”

Gordon said patience is wearing thin for people who have already put down $1,000 to get on a waiting list for the Model 3.

“This business of putting down a deposit and waiting forever to get the coolest car on the planet, well it’s no longer going to be the coolest car on the planet, so you’re going to have to start delivering them or people are going to stop buying them,” he said.

Michael Liedtke And Cathy Bussewitz, The Associated Press

by Canadian Press

Tesla 3Q production numbers up but can they be sustained?

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