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Tesla Facing Problems in Stock Deliveries

Posted: April 8, 2016 at 6:47 pm   /   by   /   comments (0)

Tesla Motors Inc. (TSLA) has been known for pre-selling cars through early reservations. Meeting the demands of their customers was always an issue because of the risks. TSLA recently issued a press release stating that they’ve produced 14,820 cars in the first quarter, which are approximately 1,200 less than 16,000 that they were aiming for.

The Many Concerns of TSLA Production

Tesla’s ability to perform their vision has been a “major question” as they move forward and they haven’t given anyone reasons to have faith on their production. Unfortunately, that’s a problem when they have almost 300,000 reservations and growing for their first mass-market vehicle.

Although their deliveries have increased to almost 50% every year, delivering only 14,820 of the 16,000 goal is still a huge 7.4 percent miss. Fortunately, TSLA have maintained their guidance of delivering 80,000 to 90,000 vehicles in 2016.

Meanwhile, TSLA have identified issues during their press release: “Tesla’s hubris in adding far too much new technology to the Model X in version 1, insufficient supplier capability validation, and Tesla not having broad internal capability to manufacture the parts in-house.”


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Although they said that they are currently addressing these three issues to ensure that they won’t happen again with Model 3, the fact is that Tesla is coming short in terms of production, delivery, and timelines.

The Risks on Tesla Stock Owners

  • Tax incentives may fall after TSLA will sell 200,000 electronic vehicles. People who have made reservations on the Model 3 car may be gaining an oft-cited federal tax credit of $7,500 for electric vehicles. But this credit starts to phase out as the company has sold 200,000 electric vehicles, a number that they’ll probably hit in 2017. How many of those 276,000 won’t end up ordering at all as soon as the tax incentive falls? Take note that to reserve a Model 3, you just have to deposit $1,000 refundable.
  • Will Tesla be able to fulfill the orders in a timely manner? Tesla has been popular for delayed productions, and customers can easily get impatient that they end up cancelling their reservations when TSLA takes too long to produce and deliver their highly anticipated model. Remember what the blowout demand Dollar Shave Club experienced after their commercial briefly went viral in 2012, it resulted in existential problems for the business as they couldn’t meet initial demands.
  • “Barclays analyst Brian Johnson on Friday said the heavy influx of Model 3 orders ‘sets the stage for an equity offering’ later this year by Tesla, much of which would go toward factory construction and product development,” according to Fortune.

The increased demand for Model 3 requires Tesla to address those three issues in a hurry. You may argue that of all the issues, hubris is the most difficult to address. Off-the-charts confidence is part of the mission Tesla and Elon Musk’s personality, and that wouldn’t change anytime soon.

Because of the press release Tesla made on Monday, their stocks have been down by about one percent.