Sunday, 19 November, 2017

Tesla Still Struggling With Production, But Skies Are Beginning To Clear

Not until 2020 – comments by Musk on Tesla’s Shanghai factory hit suppliers’ and property stocksMore Not until 2020 – comments by Musk on Tesla’s Shanghai factory hit suppliers’ and property stocksMore
Juana Turner | 03 November, 2017, 00:31

While the growth is impressive, it's the company's next phase of growth that investors are most focused on.

During a conference call with investors tonight where Musk addressed both the Model 3's production problems and the company's record $619 million quarterly loss, he yelled "SHAME" at the journalists who covered the firings, according to our own Ryan Felton, who was on the call, and numerous other reporters listening in. Here's what investors should know.

The Details: Tesla, Inc. In third-quarter 2017, the combined sales of Model S and Model X grew 4.5% from the year-ago figure. The energy generation and storage segment was helped by incremental revenue from Tesla's acquisition of SolarCity in the fourth quarter of a year ago, as well as by further acceleration in storage sales. $303.91's average target is 2.22% above currents $297.32 stock price.

Potential customers for the Model 3 seem willing to wait as long as it takes to get the vehicle, said Jessica Caldwell, Edmunds' executive director of industry analysis. "And it would be serving the China market", he clarified, noting that the factory would probably only make Model S and as-yet-unannounced Model Y vehicles. But production bottlenecks for Model 3 weighed on results and guidance.

That's because the main "bottleneck" appears to be connected to the battery pack assembly that takes place at the Gigafactory in Nevada, where Tesla is working together with Japanese specialist Panasonic on building the battery cells and compiling them into modules, then packs.

Money-losing Tesla's long-term viability depends on the Model 3, its new sedan that starts at US$35,000, about half the price of its flagship Model S.

Perhaps more significant was the warning sounded by Tesla Chief Financial Officer Deepak Ahuja that the company is not sure when it will make the next big capital investment to double the capacity of the plant's Model 3 assembly line. The company produced 260 Model 3s and delivered 222, missing the production target of 1,500. He expects margins to expand next year.

In third-quarter 2017, Tesla opened 18 new stores and service locations and added 126 new Supercharger stations.

Tesla, Inc, formerly Tesla Motors, Inc, designs, develops, manufactures and sells fully electric vehicles, and energy storage systems, as well as installs, operates and maintains solar and energy storage products. We have redirected our best engineering talent to fine-tune the automated processes and related robotic programming, and we are confident that throughput will increase substantially in upcoming weeks and ultimately be capable of production rates significantly greater than the original specification.

Tesla might be used to burning through cash like it's petrol, but the £506m loss that the United States electric vehicle maker just posted for the third quarter of 2017 is its worst yet. Its previous production goal of 5,000 Model 3 vehicles a week in December of this year is now the company's goal for late in the first quarter of next year. Specifically, it expects a non-GAAP automotive margin in Q4 of about 15%.

Tesla declined to predict when all the bottlenecks would be smoothed out, but the shareholder letter noted that by "late Q1 2018" it hoped to be producing 5,000 Model 3 vehicles per week.

Despite using over $300 million in operating activities during the quarter, worse than the $200 million it used in Q2, Tesla is optimistic about its cash situation. According to the so-called "update letter", that's going to happen toward the end of Q1 2018, which represents nearly a three-month delay.

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Things went as far as some reports suggesting certain parts of the manufacturing process were performed manually by workers, something Tesla denied initially but Panasonic CEO seemed to confirm earlier this week.

Nomura holds 0.06% of its portfolio in Tesla Inc (NASDAQ:TSLA) for 62,933 shares. The stock of Tesla Inc (NASDAQ:TSLA) earned "Overweight" rating by Global Equities Research on Friday, August 28.

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