Tesla Shares Fall after Company Delays Model 3 Production and Posts Loss of $619.4 Million

Tesla stock has slipped after the company delivered a nasty shock to investors with a third-quarter loss of $619.4 million and a three-month delay in production targets for the Tesla Model 3. The automaker moved the goalposts for mass production on the Model 3 from the end of 2017 to the end of the first quarter of 2018. The successful production and sale of the Model 3 are necessary to reassure investors that Tesla can be a mass-market electric automaker.

Tesla

Tesla has struggled to reach production goals for the ambitious Model 3. The company hopes to be one of the first automakers to deliver a popular and affordable electric vehicle to the mass market. However, the company has run into serious manufacturing bottlenecks. The company wanted to produce 1,500 units in the third quarter of 2017 but produced just 260; production was supposed to ramp up to 5,000 units per week by the end of the year but has been delayed until 2018. The company has tens of thousands of pre-orders and needs to deliver enough units to reassure industry observers and investors that it was money well spent. Tesla has sunk millions into developing their factories, battery technology, and semi-autonomous systems that are untested in the mass market.

CEO Elon Musk’s has previously reassured investors that, despite burning through immense stacks of cash at an alarming rate, the carmaker was positioned to achieve major growth in the EV market in the future. Musk’s personal brand and the idea that Tesla is “disrupting” traditional automotive manufacturers with new technology and sales channels propelled the company’s stock to record highs in 2017. Now, investors and analysts are getting tired of delays and leery of continued promises. Tesla stock slumped 5 percent on Thursday.

Analysts are now commenting that the company needs to focus on delivering the goods—and stop promising more than they can achieve. Something tells me that, given Musk’s track record, this is going to be a hard sell to the CEO. We’re just surprised it took this long. A stock slump should shock no one given the company’s track record. That said, we believe that Tesla has bought all the expensive tools they need to transition from an overvalued disruptor that attracts capital with flashy new ideas and luxury cars to a profitable business that manufactures consumer vehicles.

It’s clear that either you remain full of vague “potential” that attracts investors looking for the next big thing, or you deliver cars to consumers and manage the consequences that come from sinking billions into real-world manufacturing capacity. But combine big startup promises and big business problems and you get just one thing: sliding stock values.

There is no doubt that Tesla is still in the game. The company just needs to decide what game it is playing before it is too late.