Tesla’s bad news accelerates as Wall Street loses faith

Posted: May 25, 2019 by oldbrew in News, Subsidies, Travel, Uncertainty
Tags:

Tesla model X [image credit: IB Times]


Can electric car companies ever be financially viable? The Tesla example isn’t looking too good since government subsidies were withdrawn, pushing up prices. This article asks if Tesla is running out of buyers for its vehicles.

Late last year, Tesla Inc. was fully charged and cruising down the highway on Autopilot, says Phys.org.

Shares were trading above $370 each, sales of the Model 3 small electric car were strong and the company had appointed a new board chair to rein in the antics of sometimes impulsive CEO Elon Musk.

But around the middle of December, investors started having doubts about the former Wall Street darling’s prospects for continued growth, and the stock started a gyrating fall that was among the worst in company history.

For the year, the share price is down around 40%, largely on concerns Tesla is running out of buyers for its vehicles, which range in price from a base $35,400 Model 3 to a larger Model X SUV that can run well over $130,000.

Morgan Stanley analyst Adam Jonas, on a private call with investors this week, raised the possibility that Tesla would have to be restructured due to rising debt and falling sales. A leaked memo to employees from Musk that said sales were up stanched the stock’s bleeding, and no one is really certain about what’s next.

Here’s a look at what has happened and what might be in the future for the electric car and solar panel company:

____

WHEN DID TESLA’S STOCK START FALLING AND WHY?

A downhill snowball of bad news eclipsed anything good Tesla did, and raised investor doubt about whether there are enough buyers left who want and can afford Tesla vehicles. Throw in a little bit of erratic behavior from Musk as well.

Just before Tesla stock hit a late-year peak on Dec. 13, Musk did a weekend interview with CBS’ 60 Minutes that escalated a spat with securities regulators over his tweeting out company information. This time, he said it was unrealistic to think Tesla’s new chairwoman could control his behavior because he’s the largest shareholder. It came after Musk and Tesla each paid $20 million in fines in an October settlement with the U.S. Securities and Exchange Commission over ill-advised tweets.

____

WHAT ELSE HAPPENED?

Just after the new year began, Tesla announced record fourth quarter sales that fell short of Wall Street expectations. The company also cut prices by $2,000 per vehicle to offset the phase-out of a $7,500 federal tax credit for Tesla. That increased doubts about future sales. Then Tesla eked out a small fourth-quarter profit that also disappointed investors.

The snowball picked up momentum in February when Musk announced he would close most company stores and fill orders online. He also walked back his prediction of sustained quarterly profits, predicting a first quarter loss. When January-through-March sales figures came out, investors were disappointed again. The company had only 63,000 deliveries, down 31% from the fourth quarter.

Musk later introduced the Model Y midsize SUV, but gave few details. Investors were nonplussed. Then came a conference call to announce fully self-driving cars by sometime next year, an announcement widely criticized by experts as unrealistic. The stock slump continued.

With sales down, Tesla posted a larger-than-expected $702 million first-quarter loss in April, and Musk warned it wouldn’t be profitable in the second quarter either.

In May, Tesla sold stock and notes that yielded $2.3 billion, increasing debt. Along the way, the SEC asked a judge to find Musk in contempt for tweets about vehicle production, a spat that was later settled.

Also throw in reports of a leaked email last week from Musk to employees saying at the current cash burn rate, Tesla would go broke in 10 months.

Full article here.

Comments
  1. oldbrew says:

    Q1 2019: 63,000 deliveries and $702 million loss

    That’s over $11,000 per vehicle :/

  2. Reblogged this on Climate- Science and commented:
    Tesla`s nightmare

  3. Gamecock says:

    “That’s over $11,000 per vehicle”

    They make up for it in volume.

    Tesla is doomed. They squandered their prior franchise advantage acquired by inventing the segment, the luxury electric car. The big boys are moving strongly into the segment.

    What happened? Elon Musk. He did well initially. Then he failed to let experienced manufacturing people produce the cars. Micromanagement by his inexperienced hands resulted in thousands of mistakes. More importantly – fatally – delays.

  4. I read recently the Bosch predicted by 2030 30% of electric cars would be powered by fuel cells but the article did not say the type of fuel. The common fuel used in fuel cells is hydrogen but that has huge problems for cost and transport. There are fuel cells working on methane and LPG. At least the latter can be transported and there are service stations that have pumps. All electric vehicles and charging points make no sense particularly in the country driving more than 150km in one go. The sooner Tesla goes broke the sooner the public and politicians will realise that the move to electric vehicles is a scam to move money via governments to a few rich elite scammers.
    In time electric drive vehicles will have a place with the power provided by on board source just as the situation with diesel electric locomotives for long haul rail. In the long term it could be a nuclear device. In the short term the way to go is hybrids with petrol or diesel motor driven generators. Fuel cells maybe an option if the can run efficiently on LPG.

  5. Graeme No.3 says:

    cementafriend:
    Agree that hybrids are the solution, at least until the promised sooper-dooper battery arrives. Mind you that battery has been coming for at least 30 years and may be that time in the future.
    A friend has one, electrics work for a 50km. trip, petrol for longer range. Charges O/N on household plug.

    Hybrids would avoid range anxiety, avoid inner city CO2 emissions, avoid need for charging points everywhere, avoid huge drain on the electricity grid; all round a sensible option so The Greens will be rabidly against them.

  6. oldbrew says:

    Tesla EVs are too expensive for the mass market. Big batteries in general are expensive – hence the subsidies – and will fade and die at some point.

    Hybrids are favoured for company car tax concessions where the driver can still use fuel anyway.

  7. oldbrew says:

    The UK Needs To Double Its Charging Points To Support EV Adoption

    Currently, the UK has 13,500 EV charging points—half of what the UK will need if it were to support seven million electric cars on the roads by 2030.

    https://oilprice.com/Latest-Energy-News/World-News/The-UK-Needs-To-Double-Its-Charging-Points-To-Support-EV-Adoption.html

    Where are the 7 million buyers?

  8. Gamecock says:

    ‘Currently, the UK has 13,500 EV charging points—half of what the UK will need if it were to support seven million electric cars on the roads by 2030.’

    13,500 X 2 = 27,000

    7,000,000 / 27,000 = 259

    One charging point for every 259 EV cars?

    What am I missing here?

  9. oldbrew says:

    Gamecock – those are public charging points. People will charge at home where possible.

    Workplace charging may not be in those quoted numbers either.

  10. oldbrew says:

    Tesla is now doomed. Here’s how its EV dream will soon come crashing down
    By Adam Kaslikowski — Posted on May 28, 2019

    The only way to be successful at car manufacturing is to do it at a very large scale. You have to sell hundreds of thousands, if not millions of cars per year to be stable. In 2018, Tesla shifted a total of 245,240 cars.
    . . .
    Tesla’s worst enemy is Elon Musk. The serial entrepreneur has an affliction that many serial entrepreneurs have: Shiny Thing Syndrome. Mr. Musk loves to chase after new challenges and novel projects.

    https://www.digitaltrends.com/cars/tesla-is-dying-and-this-is-how-it-will-end/

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