Tesla ’s decision to fire $ 2 billion by selling young stock this Wednesday caught a circle of fans and investors by surprisal . Until recently , it was knockout not to accrue in love with Tesla and its goal of making new electrical cars affordable and fun . The line of descent price has gone up bynearly 700%in five years andConsumer Reportscalled the Tesla Model Sthe best car it ever testedback in the summertime of 2013 .
The speculative news is , since that time , Tesla has been forced to present a reality that many of us share with in our own life : money and popularity ca n’t solve our gravid problems . And Tesla , it just so happen , has alotof job .
If you invested $ 1 in Tesla back in September 2014 , you now have around 70 to 80 cent . The company’sstock has been quietly stagnantfor three years now , and Tesla ’s announcement that it ’s selling $ 2 billion in shares to produce much - needed hard currency is set off warning bells .
Courtesy of Tesla
Look , I jazz the idea of Tesla , but there ’s a major disconnect between its reputation and its real power to get diddly-squat done . The company continues to be unrealistic about its future plan – andits ability to achieve them . If you were view investing , here ’s why you should run .
Tesla might need to raise five times the cash it’s hoping to – just to keep its lights on
draw a blank about Tesla making a profit , or even breaking even : the Tesla Gigafactory , presently under construction in Nevada , is give way to be the ship’s company well over $ 3 billion to fill in . The new Model 3 will likely sum up at least $ 1.5 billion to that totality if output reach Musk ’s lofty goal of 500,000 vehicles a twelvemonth ( and that ’s a bigif … we call bullshit ) . Last year alone , Tesla ’s cash catamenia was well over $ 2 billion … in the red . The company presently has no automotive partners to facilitate the 10 million - square - foot Gigafactory reach its capacitance . In fact , Toyota and Daimler ( which own Mercedes - Benz , etc … ) sold their stakes in Tesla way back in the fall of 2014 and have give up all joint venture with the companionship .
In the car business , where joint venture and cooperation are essential towards celebrate costs down , Tesla ’s position of going it alone could become fatal .
Even worse, Tesla’s entire business model has an expiration date
chance are good that you ’re conversant with the$7,500 federal tax creditcurrently in piazza for galvanic fomite . What you may not know is that this government subsidy – which is honest for 200,000 vehicle for each manufacturing business – is scheduled to prevail out for Tesla by late 2017 to former 2018 . This means that the immense majority of buyers who placed a deposit for aModel 3won’t be receiving that $ 7,500 subsidy – making the car that much more expensive than its advertised price .
Worse still for Tesla , competing gondola from other manufacturers will have an inbuilt $ 7,500 cost vantage over that fashion model – at least for a while . In other language , even if this livestock sale results in dissipated production times and Tesla somehow hits what looks like a mythological production end , the subsidy issue looms large .
Even with $2B in cash, Musk’s “500,000 cars per year” just isn’t happening
Raising funds alone wo n’t as if by magic make Tesla ’s production goal feasible , at least not in Elon Musk ’s aggressive 2018 timeframe . Musk has already say that Tesla wo n’t bump off its production targets for the summer of 2017 due to the need to “ solve the supplying chain and internal production issue . ”
AsForbesrecently indicate out , these issues are n’t small– they ’re grievous . Why ? Today ’s vehicles require over30,000parts , and failure rates of those parts ca n’t even make a few pct if the companionship is to pull round . But Tesla suffers from chronic quality - control issues ; as a solution , the Model X launching failed spectacularly . The companionship planned aweeklyrun at 750 vehicle , but only managed to squeeze out2,420 vehicles in the first quarter– that averages out to less than 200 cars a week . Then there were theFalcon Wing doors that do n’t open , and theextraordinarily gamey drivetrain nonstarter rates . The overall quality ascendency is so bad thatConsumer Reportsrecently pulled the Model S off its recommended list .
Tesla is a young manufacturer with a huge learning curve to overpower if it plans to master tenacious - terminal figure quality . As far as the Model S is concerned , the seek to mass grow 500,000 vehicle will only harm Tesla ’s aid to quality control .
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Even the biggest and best manufacturers can’t pull off such ambitious goals
Toyota has manufactured more assembly plants and earned more quality awards than any other automaker over the last 30 years . In fact , Toyota ’s quality effort have been so far beyond the industriousness standards that General Motors , the world ’s largest machine manufacturer , develop a joint venture with Toyota just so that it can considerably find out and understand theToyota production system of rules .
Toyota ’s talents tookdecadesof uninterrupted improvement and learning . Yet Toyota will still needfour yearsto develop a newfangled gathering industrial plant in Mexico – with only a 300,000 - vehicle capacity . It ’s not the physical construction of this plant that is the obstruction . It ’s developing the talents and potentiality of suppliers , many of whom already supply Toyota with millions of parts worldwide .
Even if Tesla had all the money in the globe , it simply does n’t have the level of experience to carry out its 500,000 - whole destination in half that metre , and it certainly does n’t have the relationships . Sure , Tesla ’s the " it " brand of the second , but it has a history of anticipate dandy success , only to fall short of expected value sentence and again . If that ’s the kind of company you want to enthrone in , I ’ve got some fantabulous oceanfront property to sell you .
Courtesy of Tesla
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