It’s in “production hell,” according to Elon Musk Time
Corrections & Clarifications: A previous version of this story misstated the rate of Tesla vehicle sales in comparison to DeLorean Motor Co. sales.
The annals of the automotive industry are filled with bold upstarts who failed to reinvent the business after they gravely underestimated how hard it really is to make cars.
Look no further than John DeLorean, for example. DeLorean's car company flamed out in the 1980s after turning heads with gull-wing doors that bear a striking resemblance to the falcon-wing doors on Tesla's Model X.
Will Tesla CEO Elon Musk join the Back to the Future carmaker on the list of swashbuckling executives who made a big splash but ultimately failed to reimagine the auto business?
To be sure, Musk has already accomplished much more than DeLorean, whose DeLorean Motor Co. built only 9,080 cars before collapsing. That's about as many as Tesla sold monthly last year.
But with production of the new mass-market Tesla Model 3 electric car struggling to speed up, some investors are losing faith in the billionaire innovator, who is also CEO of rocketmaker SpaceX.
Tesla stock plunged 23% from March 12 through March 29, the last day of active trading. At $266.13, shares are 32% below their all-time high of $389.61.
Last week, Moody's downgraded Tesla's bond rating and lowered its outlook from stable to negative.
"Tesla's ratings reflect the significant shortfall in the production rate of the company's Model 3 electric vehicle," Moody's said.
Musk has acknowledged navigating "production hell" with the Model 3, which has been plagued by delays as he tries to adopt advanced factory automation. But Musk remains confident he can revolutionize vehicle making.
"The car industry thinks they're really good at manufacturing. And actually they are quite good at manufacturing, but they just don't realize just how much potential there is for improvement," he said in February. "It's way more than they think."
Musk bragged that Tesla's futuristic approach to vehicle manufacturing, which relies heavily on high-tech robotics, will be its "long-term, sustained competitive advantage." That includes automating not just the processes of stamping, painting and welding, which most automakers already do, but also eventually automating final assembly.
Since launching production in July, the company has reportedly encountered a litany of challenges, such as parts shortages and basic miscues that have forced technicians to scramble to fix assembly-line production errors after the cars were supposed to be finished.
Consequently, industry experts are beginning to question Musk’s manufacturing strategy.
"Tesla has not only tried to reinvent the car, but has also tried to reinvent the production line, with hyper-automation," Sanford Bernstein auto analyst Max Warburton said Wednesday in a note to investors. "This is creating serious issues."
Part of the problem is that Tesla rushed into manufacturing too quickly, said AutoPacific analyst Dave Sullivan, who formerly worked in an assembly plant.
The company appears to be "more concerned with getting butts in seats and fixing the quality issues after the fact," Sullivan said. "Early adopters will look the other way for now, but that goodwill won't last for long."
Tesla did not agree to comment for this story.
But engineering chief Doug Field told employees in a March 23 email obtained by Bloomberg that workers should find it "personally insulting" that critics are questioning Musk's strategy. He exhorted workers to help boost Model 3 production.
“Let’s make them regret ever betting against us," Field reportedly wrote. "You will prove a bunch of haters wrong.”
Investors want to see accelerated production of the Model 3 when the company reports first-quarter earnings in a few weeks.
At one point, Musk had promised the company would make 5,000 units per week by the end of 2017. The company quickly backed off that goal.
Tesla's most recent projection was to hit that pace by the end of the second quarter of 2018.
For Musk to get Tesla back on track, he'll have to confront several pressing matters:
1. His push to automate manufacturing might have been a mistake.
Warburton said the best manufacturers, such as famously efficient Japanese automaker Toyota, have learned that automating vehicle assembly is expensive and leads to poor quality.
"Tesla might ultimately need to fundamentally rethink" its entire approach to manufacturing, he warned.
In February, long after production began, Musk was still pledging to create "a very sophisticated automated parts conveyance system" to help improve the efficiency of the company's assembly plant in Fremont, Calif.
2. Tesla is burning cash at a torrential pace.
The company is racking up losses at a furious rate, in part because it has spent more than two times as much as traditional automakers in per-unit manufacturing capacity, according to Sanford Bernstein.
Tesla reported a net loss of $675 million for the fourth quarter, up from $121 million a year earlier.
Prices of Tesla bonds issued in August plunged to all-time lows last week as the company's challenges stacked up.
Moody's said Tesla's $3.4 billion in cash and securities at the end of 2017 "is not adequate to cover" normal operations, increased production and bond payments.
Speculation that Tesla could soon run out of cash is probably premature because the company still has a market value of about $44 billion and could sell more stock to raise money. But that could come at a cost, potentially pushing shares down further.
If the company meets its revised Model 3 production goals of 2,500 units a week by the end of March and 5,000 by the end of June, the prospects for satisfying the company's cash needs "will be supported," Moody's said.
3. Competitors are catching up.
After years of sluggish electric-car development, automakers are finally catching up.
General Motors actually beat Tesla in the race to be the first automaker to deliver a mass-market electric car with the Chevrolet Bolt.
And now a new entrant is promising better range than both the Bolt and the Model 3.
Hyundai said Wednesday at the New York International Auto Show that its new Kona electric compact SUV will get 250 miles of battery range. That's better than the base-model Model 3's 220 and the Bolt's 238.
In luxury electric cars, several competitors to Tesla's Model S sedan and Model X are also popping up. Jaguar recently showed off its I-Pace crossover with 240 miles of electric range.
4. Questions linger about a recent crash.
The National Transportation Safety Board opened an investigation last week into a deadly crash in California involving a Model X that struck a highway median and flipped into oncoming lanes, where it was struck by two vehicles.
NTSB officials will investigate whether Tesla's partially self-driving system, called Autopilot, was activated during the crash.
Any indication that Autopilot is flawed could raise further questions about Tesla's technological leadership.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
ARE THE FACTS THAT TESLA MOTORS AND ELON MUSK WILL DO ANYTHING (EVEN
THE MOST HORRIBLE THINGS YOU CAN IMAGINE) TO COVER UP:
Lithium ion batteries: Cause wars in the Congo, Afghanistan and Bolivia; are owned by ex-CIA bosses; mutate fetuses when they burn; destroy your brain, lungs and nervous system when they burn; kill the factory workers who make them; cause Panasonic to be one of the most corrupt companies in the world; poison the Earth when disposed of; can't be extinguished by firemen; poison firemen; are based on criminally corrupt mining schemes like URANIUM ONE; Have over 61 toxic chemicals in them; come from an industry that spends billions on internet shills and trolls used to nay say all other forms of energy; are owned by corrupt U.S. Senators who are running a SAFETY COVER-UP about their dangers; Apple products with lithium ion batteries have been exploding and setting people on fire; over time the chemical dendrites inside each battery grow worse and increase the chances of explosion over time - LITHIUM ION BATTERIES BECOME MORE AND MORE LIKELY TO EXPLODE AS TIME GOES ON AND AS THEY AGE; "Bad Guys" have figured out to make them explode remotely; have their dangers hidden by CNN and MSM because pretty much only the DNC people profit from them; are the heart of Elon Musk's stock market scam; the Obama Administration promised Silicon Valley oligarchs the market monopoly on lithium ion batteries and the sabotage of fuel cells in exchange for campaign financing and search engine rigging; United States Senators that are supposed to protect us from these deadly products own the stock market assets of them so they protect them and stop the FDA, OSHA, DOT & NHTSA from outlawing them. WRITE YOUR ELECTED REPRESENTATIVE AND DEMAND THAT LITHIUM ION BATTERIES BE MADE ILLEGAL TO SELL!
Elon Musk exists because he bribed DNC politicians and Senators Feinstein, Reid, Boxer, Harris, Clinton and Pelosi to give him free taxpayer cash and government resources from the Dept. of Energy and the Calif treasury. DOE has been covering-up organized crime activities at DOE in which DOE funds are being used as a slush-fund to pay off DNC campaign financiers and to pay for CIA/GPS Fusion-Class attacks on Silicon Valley business competitors of those DNC campaign financiers who DOE staff share stock market holdings with. Elon Musk is a criminal, a mobster, an asshole, a bald fake-hair wearing, plastic surgery-addicted, douchebag, woman abusing, sex addicted, tax evader. Musk exploits poor people and child slaves in the Congo and Afghanistan to mine his lithium and Cobalt. Musk spends billions per year to hire Russian trolls, fake blogger fan-boys and buy fake news self-aggrandizement articles about himself. Musk thinks he is the 'Jesus' of Silicon Valley. Fake News manipulator Google is run by Larry Page and Larry is Musk's investor and bromance butt buddy. Musk uses massive numbers of shell companies and trust funds to self-deal, evade the law and hide his bribes and stock market insider trading. A huge number of Tesla drivers have been killed and Musk covers it up. The DNC and the MSM refuse to allow any articles about Musk's crimes to be printed because they benefit from Musk's crimes. Musk has been professionally diagnosed as a 'psychotic narcissist.' In EVERY blog that you read that mentions 'Musk', at least 1/3 of the comments have been placed their by Musk's paid shills. Musk holds the record for getting sued for fraud by his investors, wives, former partners, employees, suppliers and co-founders. Elon Musk has gone out of his way to hire hundreds of ex-CIA staff and assign them to "dirty tricks teams" to attack his competitors and elected officials who Musk hates. Musk never founded his companies. Musk's "Starlink" satellites are domestic spy and political manipulation tools - never get your internet from one. He stole them in hostile ownership take-overs. The same kind of EMF radiation proven to cause cancer from cell phones exists in massive amounts in a Tesla. Musk can't fix a car or build a rocket and has almost no mechanical skills. Musk is a lying con artist and partners with Goldman Sachs to rig the stock market. Over 1000 witnesses can prove every one of those claims in any live televised Congressional hearing!