It's Time to Figure Out What's Going on at Tesla Motors
Lately, we’ve been guilty of the same behavior as a lot of other well-rounded and objective automotive publications — bashing Tesla Motors. It hasn’t been done maliciously, but we’d be lying if we said the divisive hype and hate surrounding the company didn’t bother us. However, since the summer launch of the Model 3, a slew of happenings at Tesla have have raised unanswered questions.
The biggest question surrounds the cause of the company’s rather severe production delays. Tesla also fired hundreds of employees this month, without any clear answer as to why, and seems to have shelved a cross-country trip aimed at highlighting the progress made with its Autopilot driver assistance platform.
None of this would be quite so noteworthy if its stock valuation wasn’t still stratospherically high and CEO Elon Musk hadn’t publicly promised so much — but that isn’t the reality we’re living in. Now, with the company reporting its third quarter earnings on Wednesday evening, we’re hoping to get some clarity on what exactly is happening in Fremont, California.
Earlier this month Tesla reported that it had only built 260 Model 3 sedans in the third quarter, despite forecasting 1,500 units in the same timeframe. Citing “production bottlenecks” as the reason, the automaker hasn’t given any additional explanations for the assembly delay. Bloomberg, also keen for answers in this weeks earnings report, said Musk was “camping” on top of the company’s Gigafactory outside of Reno, Nevada, and speculated that the problem could be a battery supply issue.
Taking a step back and looking at Tesla’s production goals in comparison to well-established manufacturers doesn’t inspire a lot of confidence, even under idyllic circumstances. The company is trying to explode into high-volume production at a pace that is difficult to comprehend, and without a clearly outlined path to get there. With delays ongoing, shareholders need more answers and less self-promotion.
One such solution could stem from adding a production facility in China. In June, Tesla said it’s “working with the Shanghai Municipal Government to explore the possibility of establishing a manufacturing facility in the region to serve the Chinese market.” That deal was expected to have solidified into something tangible by the end of the year, but we’ve yet to hear anything.
We also haven’t heard much regarding the company’s staffing issues. The firm has lost essential members of its Autopilot team, potentially stalling autonomous development plans and explaining why we haven’t heard anything about enhanced features in a while. But it also reportedly fired a large hunk of its production team in California this month. While Tesla remains somewhat tight-lipped on the reasoning behind it, the United Auto Workers has filed a federal complaint claiming the layoffs were a result of Fremont-based employees supporting efforts to organize.
When questioned as to the validity of the UAW’s claims, Tesla eventually stated that the terminations were part of a performance review process. “At Tesla, we strive to be a fair and just company, the only kind worth being,” a spokesperson said in an email. “Performance reviews result in promotions and occasionally in employee departures. No one at Tesla has ever or will ever have any action taken against them based on their feelings on unionization.”
Still, the layoffs came as a bit of a surprise from a company striving to bolster volume and maximize production hours. However, if these employees were dead weight, losing them wouldn’t necessarily be a crushing blow.
Perhaps the biggest conundrum is that of the company’s financing. While we know Tesla had around $3 billion in cash at the end of the second quarter, we also knew that the Model 3 was going to be a six-month money pit. There was no way it couldn’t be. But, with individual delivery wait times stretching to the end of next year and no word yet on how the company plans to solve its production problem, we don’t know how long this cash burn is going to last.
Hopefully, Tesla can provide the public with some clear answers in tomorrow’s report, because we really could use them at this point.
[Image: Tesla]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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I would only be concerned if I were a Tesla shareholder, or an employee of the SEC, neither of which describes me. And ramping down focus on autonomous driving development is probably a good idea. . .
I am sure that Musk has his strategic reasons for his Alleingang in producing Teslas, and that production itself is pretty specific... But working together with other car manufacturers could have solved the issue of getting seriously behind with producing Teslas. Particularly since there are still plenty of abandoned and uderused production facilities. Nothing new to subcontract another car maker. Valmet and Magna would have been happy to cater to Tesla, is my guess.