Is Tesla Biting off More Than It Can Chew?
Highlighting Tesla’s electric vehicles business.
Tesla is currently topping a lot of lists. It’s ranked number 1 of 24 in StockNews.com’s POWR rating for stocks in the Auto & Vehicle Manufacturers category. During the last couple of weeks, Earlier in April, Tesla has also become US most valuable automaker by market capitalization, exceeding 100-year-old industry giants Ford and General Motors. As of Monday, April 17, Tesla’s share price had slipped to $49.16 billion, compared with GM’s $51.08 billion.
The company has been named Forbes’ Most Innovative Company in 2015 and 2016. It is ranked above any other luxury brand in the American Consumer Report Magazine’s ‘’brand perceptions’’, the magazine announced that Model S was the best car it had ever tested with results of 99 points out of a possible 100.
While some analysts argue that market cap and public affiliation doesn’t translate into a smashing performance, other believe Tesla is paving the way for a new, sustainable future and the roads to achieving that are ought to be bumpy.
Related article: The Future of Automobile is Tesla
How did a small company like Tesla get here? Was it the daring innovations and the prestigious exposure or the dream of a better future? And what is it really selling us? Luxurious cars, or a healthier, eco-friendly lifestyle? With the company’s wide array of projects; eight models in the pipeline, will Tesla maintain its excitement to develop or lose to production deadlines?
Tesla has declared its goal to produce 500,000 cars annually by 2018 and to double that number in just two years. However, there are some factors that Tesla should mind; its annual vehicle production in 2016 has been a modest one of just 76,000 cars.
A quick market cap versus 2016 auto sales comparison conducted by Business Insider states that while the market cap of Fiat Chrysler stands at just $15.75, Ford’s $43.88, Tesla $49.30 and GM’s the highest with $50,87, Tesla’s last year auto sales come in last with just 76,230, in the meantime, the other big three companies’ sales range between 2,244,315 to 3,042,773. Proving that while Tesla is America’s media and market capitalization sweetheart, it’s not really a profit-making company, not quite yet at least.
Another important point is expenditures, Pantagraph.com stated: ”Tesla didn’t provide specific guidance for its capital spending in the first quarter, it did say it expected to spend between $2 billion and $2.5 billion during the first half of the year — well above Tesla’s $1.3 billion in capital expenditures during the entire year of 2016.”
On the bright side, according to Autolist, Tesla’s used Model S sells faster than other luxury carmakers as Volkswagen, Audi, Lexus, and Mercedes-Benz.
”Used Model S sedans had the briefest time on the market of all vehicles included in the survey, taking, on average, 87 days to sell. That was about five percent quicker than the average for vehicles in the model’s peer group, which included the Audi A7, the Porsche Panamera, the BMW 6 Series, the Mercedes-Benz CLS and the Lexus LS 460,” MarketWatch revealed.
Nonetheless, the prices of used Model S Sedans range between three to five percent above other competitor’s vehicles, Autolist said. ”Tesla’s have maintained that performance lead throughout the past year, which surprised the researchers,”the website added.
Tesla’s innovations in the works
Perhaps Tesla’s most awaited event this year is the release of the new Model 3, the electric company’s most affordable car to date starting with just $35,000, and easiest to produce as well. This model will offer more than any other $35,000 ever could. It’s been a year since Musk first unveiled the model in a live event. More than 370,000 people put down a refundable $1000 deposit to reserve theirs. The model’s production is expected to start in July.
The birth of Model 3, followed by the discontinuation of the company’s Model S 60 and 60D on April 19th. A practical move by the company to make room for its latest model. And also, to avoid confusing with somewhat similar vehicles.
Tesla’s first quarter sales of more than 25,000 vehicles exceeded Wall Street expectations for the company and inspired an upward march in the company’s shares and market capitalization. Tesla said 13,450 of the vehicles delivered in Q1 were Model S and 11,550 were Model X. Plus, an additional 4,650 vehicles were in transit to customers, which would be included in Tesla’s Q2 numbers. This makes us wonder if Model 3 release could be the kick Tesla needs to see a significant rise in the delivery numbers.
Last week, the company revealed its Q1 results, according to Reuters, Tesla achieved a loss of $1.33 per share versus an expected loss of 81 cents per share. A result that Wall Street was expecting. Tesla’s revenue marked $2.7 billion, doubling last year’s record.
Model 3 isn’t the only model Tesla is preoccupied with, there’s the Model S luxury sedan and Model X SUV, and in their developmental stages, the Model Y, an SUV built on the Model 3 platform, which will highly be tesla’s next focus post the Model 3.
Then there is Tesla Semi-truck which Musk has tweeted about last week, its plan will be revealed in September, while the Tesla Pickup will be unveiled within 18-24 months from the Semi, both described by the CEO as ‘’Seriously next level.’’ Upon Musk’s announcement, one worries for Tesla, whether now is really the best time for the company to work on electric trucks.
Tesla Semi truck unveil set for September. Team has done an amazing job. Seriously next level.
— Elon Musk (@elonmusk) April 13, 2017
However, it’s all been planned out in Musk’s Master Plan, Part Deux, published on the company’s blog in 2016, he said: ‘’In addition to consumer vehicles, there are two other types of electric vehicle needed: heavy-duty trucks and high passenger density urban transport…We believe the Tesla Semi will deliver a substantial reduction in the cost of cargo transport while increasing safety and making it really fun to operate.”
On the other hand, Tesla isn’t the only brand cultivating its truck business: Ford has announced earlier this year its intention to produce a hybrid F-150, the truck is still in the works but it will have an average hybrid powertrain. As for Mercedes-Benz Trucks, they’re bringing the world’s first electric heavy-duty truck this year following a presentation at the International Commercial Vehicle Show in 2016.
Stefan Buchner, Head of Mercedes-Benz Trucks, explains to OEM Off-Highway, the car produces ‘’Zero emissions, quiet as a whisper and with a payload of 12.8 tons: The Urban eTruck offers an impressive economical and environmentally friendly concept.’’
In addition to the new version of the Tesla Roadster, which remains unnamed. Musk said that the car is still ‘’a few years away.’’ According to Teslarati, “The next generation Roadster will also be the company’s quickest vehicle within its fleet, capable of smashing the 0-60 mph in 2.3-second barrier set by current king of the hill, the Ludicrous+ Model S P100D…Musk has confirmed in the past that Tesla’s next-gen Roadster will be equipped with a Maximum Plaid mode which takes the existing top-of-the-line Ludicrous+ mode one step further.”
Then there’s the last in line, the Tesla Minibus, which is said to be built on the company’s Model X platform, the minibus is inspired by customized Volkswagen vans, according to Musk.
Tesla has its hands on many projects, but the company’s core is energy and power storage, thus, a valid question arises; will Tesla be able to maintain a stable vehicle business; finish its models and release dates on time? And Will the US market witness more than a substantial rise in capitalization? We’ve got 4-6 years to find out.