Tesla Motors Inc (TSLA) is Haunted by Two Damning Factors

Tesla Motors Inc (NASDAQ:TSLA)

Tesla Motors Inc has a lot going on right now. The firm is the leader in the electric vehicle industry, and to maintain that position, it needs to continue innovating. Also, the EV firm is making investments in battery R&D directed at making EVs more affordable for mass adoption. So, there are several initiatives for which Tesla needs a lot of funding.

Tesla is Haunted by Two Damning Factors

Tesla has not yet reached breakeven, and therefore, its focus should be on EVs primarily while it should delay integrating SolarCity until then. This becomes more important since GM is very close to bringing Bolt in market. For all these reasons, it is of utmost priority for the company to have a new management, notes a report from Seeking Alpha by Market View.

Tesla Motors Inc (TSLA) Factory Freemont, California

Elon Musk has several goals, and one of those is to make EVs a mainstream automotive choice. EVs and hybrids are not affordable for mass-market adoption, and unlike traditional vehicles they offer limited range and do not provide refueling convenience. MIT Technology Review says, “For all their attributes, electric cars still are haunted by two damning factors: high costs and less-than-optimal batteries.”

Rising competition a big threat

Chevy Bolt will be the first EV with sale price being lower than $40,000, and will offer a lot of attractive features. The range of the vehicle will be more than 200-miles, which will definitely appeal to the range anxiety customers. This vehicle will have a great impact on the market as it will get 238 miles on a single charge, which is more than Tesla’s upcoming mass-market Model 3, according to Fortune.

GM intends to have the Bolt at dealerships by 4Q16 as per Detroit News. On the other hand, Tesla Motors Inc will introduce the Model 3 sometime in late 2017, and everyone knows Tesla hardly meets its deadlines, the report notes. Apart from Tesla and Bolt, there are automakers in the line as well.

So, it won’t be wrong to say that the EV market is evolving fast, and Tesla needs to focus on attaining financial flexibility to keep up with the rivals. The objections to the SolarCity acquisition have been well covered by the press. And, it is well known that both the firm are  highly leveraged, and Tesla has been turning to the capital markets to get more funds.

Tesla now needs to turns profitable

Tesla has put in a lot of effort to grow its top line, and the results are good too. The EV firm reported revenue worth $204.2m in 2011 that reached $4.0bn in 2015. “However, we think it might be time for Tesla to bring in new management with strong financial and operating experience to help convert that revenue to positive earnings and cash flow. We would like a new team to take what Elon Musk has built and develop it into a profitable company,” says Market View.

It is possible that Tesla Motors Inc will get help from SolarCity in its gigawatt or even with its Powerwall initiative. But Powerwall is a small, ancillary part of the overall business, and gigawatt doesn’t need SolarCity to be in-house.

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Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.


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