Tesla Motors Inc boss Elon Musk is a master of showmanship. His careful navigation of Wall Street, and the tech and auto press, has made Tesla what it is today. Last week with the release of the firm’s Autopilot software he managed that yet again. Tesla Motors had been having massive problems with the Model X, in the eyes of Wall Street at least, but they’ve gone away in the last couple of days.
On Friday shares in Tesla Motors rose by more than 2 percent on news that the car’s Autopilot system worked. Worried about the Model X release date, which had loomed over discussion on the firm all week, were nowhere to be found. As we wait for the first real unit of the car to be released, more than 2 weeks after the big launch, hard questions still need to be asked.
Tesla Motors fails to ship the Model X
At the launch of the Model X Tesla Motors got six units of the car to buyers. All six of those went to people with strong ties to the firm, and each one accepted the car and drove off with it. Since then we haven’t heard anything about more Model X shipments, and some of those with top reservations have still to get theirs.
We know that it’s been more than two weeks since Tesla Motors launched the Model X, and we know that the firm hit its stated release date with those six shipments. In pure business terms, however, the influx of sales that Wall Street was expecting for the Model X on launch and shipment just isn’t happening.
Tesla Motors isn’t taking full price for a car it doesn’t know the shipment date of. The firm only completes the sale of the car, and reaps the financial reward, between the time it’s in production and the time it ships to a buyer.
Forecasting Model X shipments
On October 11 Bonnie Norman, who holds the second Model X reservation, showed that she had a VIN number assigned to her order. That means that the car is likely in production at this point, but it’s still not clear when the first Model X will really arrive.
There is no one out there that seems to have real insight into the roll out of the Tesla Motors Model X, but it seems that Wall Street is less and less hopeful that the firm will have itself together by the end of the year.
Pacific Crest’s Brad Erickson said in an October 15 report that now was not the time to own shares in Tesla Motors. Erickson said that not only was the Model X late, it was also less than in demand in the wake of the reveal. “Checks indicate that Model X reservations are soft, while Model S demand has picked up since the X launched,” he wrote.
Erikson says that “test drive-ready Model X cars are critical to improve awareness and demand for first-time Tesla buyers, and believe it’s unlikely to see these before year-end.”
Barclays’ Brian Johnson said in an October 9 report that “the slow X ramp calls into question whether Model 3 will launch on time.” That’s the kind of idea that those selling Tesla Motors shares are playing with right now, but in the long term the failure to launch the Model X won’t really matter.
Tesla Motors failure doesn’t matter
We don’t know how far behind Tesla Motors is on making the Model X, but it seems clear that the firm’s September 29 event was simply for show. We still haven’t heard of real people getting their hands on the car, and it seems that roll out will be sluggish once it begins.
Autopilot has taken the pressure off of Elon Musk and his team, at least in recent days, but the firm needs to get the Model X out the door in order to appease Wall Street. Failing to hit its delivery target for 2015, something more and more of Wall Street seems to think is likely, will hit stock hard in the short term, but in the long term none of this is going to matter.
The Tesla Motors story is a long term one, and none of the problems in recent weeks changes the narrative. Either Tesla Motors makes the EV a mass market reality and is worth tens of billions, or it crashes and burns under the weight of its huge debt. There’s not all that much room in the middle for Elon Musk’s firm.
That doesn’t change the short term reality. Model X is slow, and that’s hurting demand for the EV SUV. Elon Musk, and Tesla’s software team, have taken some of the weight of that delay off of shares in recent days with the Autopilot release, but that may not last much longer.
Tesla Motors stock gets shook
For those betting on Tesla Motors because they think the firm is going to change the world and make a profit at the same time, the slow release of the Model X isn’t much of a crisis. It may take away from the number of units of the Model X that get to buyers this year, and it may even impact the Tesla Motors 2020 target of 500K units shipped.
For those that think Elon Musk really can sell the EV, however, Tesla Motors is way ahead, and the firm will work out the kinks in its supply chain. The only major risk is a loss of support from Wall Street. Tesla Motors needs a lot of cash to get the Model 3 on the road, and the firm just doesn’t have a whole lot of prospects of making that cash itself.
That means that Tesla Motors may have to resort to the capital markets once again in the coming years in order to make the Model 3, and the future of the EV, a reality.
Tesla will release its earnings numbers for the three months through September at the start of November. The key number on that release will be the firm’s Model X shipment forecast for the fourth quarter as well as the rate of cash burn in the quarter.
For now Autopilot has granted those with shares in Tesla Motors a small reprieve. The tech was received well, and it appears to work as described. That boon is only going to be short-lived, however. As Tesla Motors delays the roll out of the Model X more and more, Wall Street is likely to get more and more anxious about the firm’s short term.