2017 is a ‘Make or Break’ Year For Tesla Motors (TSLA): Here’s Why

Tesla Inc (TSLA)

Tesla Motors Inc is facing three major tests this year (though there are more). How CEO Elon Musk deals with certain issues will determine whether the EV firm makes it successfully through what will be the most important year in Tesla’s history, says a report from Business Insider.

Launching Model 3

Tesla’s major tests fall into three categories: production, financing and management. The main objective of the automaker for this year should be relentless focus on passing these three major tests.

Tesla Motors Inc knows how to build a vehicle, and if it achieves its goals of delivering 50,000 electric vehicles in the second half of 2016, then it will begin to get its production game together. The CEO has started to develop some potentially revolutionary new ideas about the future of manufacturing, however, in the short-term, getting the Model 3 sedan, which is slated to price at $30,000 after tax breaks, to the assembly lines in Fremont, CA by this year’s end is all about tackling and blocking, notes BI.

The affordable Model 3 is supposed to be engineered and designed to a price-point, which means sheet metal rather than aluminum for the body panels and a smaller battery than the battery which goes into the high-end X and S. Also, the Model 3 has less fancy interior overall. The traditional car making companies would have no difficulty in producing tens of thousands of Model 3-type cars on schedule, but there is a doubt about Tesla being able to pull it off.

Integrating SolarCity with Tesla

Another test would be integrating SolarCity with its other lines of business. Getting the Model 3 deployed on time is nothing in comparison to this one. The $2.6bn deal to merge with the solar company brings with it a $3bn debt. However, that will only have an impact on the balance sheet. The larger challenge is merging a solar-panel leaser and installer and a carmaker together.

Tesla Motors Inc. (TSLA) Store in Southern California

SolarCity is a large, but weak player in the solar market, and is going through a fundamental business change. The early success of the solar company in the residential rooftop solar because of its leasing model. The automaker is now shifting to a manufacturing-and-sales model, showcased by the solar roof product that Musk showcased in late 2016.

This could eventually improve the debt-laden aspect of SolarCity on Tesla’s balance sheet. It is, however, a new thing, and Musk will possibly have to drive it forward. But failure is not an option now.

Along with these two, the third big test for Tesla Motors Inc will be to control the cash burn, and also support its stock price. In 2016, Tesla shares closed down almost 11%. In last one-month, shares are up over 17%.

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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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