Tesla’s breakneck expansion speed could be a car crash

 
Arjun Kharpal
Tesla Debuts Its New Crossover SUV Model, Tesla X
Source: Getty

Tesla chief executive Elon Musk surprised fans and investors last week with the unveiling of a $200,000 Roadster that he claimed could go from zero to 60 miles per hour in 1.9 seconds.

At the same event, the billionaire also unwrapped a hotly-anticipated truck called the Tesla Semi.

Two launches at one event might not sound so ambitious. After all, many car manufacturers bring out numerous models at the same time.

But Tesla unveiled the new vehicles even as the Model 3 continues to have production issues.

Musk tweeted about “production hell” back in October, and that’s exactly what it has turned into.

Read more: Tesla delays production of its mass-market Model 3 car

Despite expecting to make 1,500 of its $35,000 mass market Model 3 cars during the past quarter, Tesla produced just 260.

There are currently a lot of unhappy customers.

On top of that, Tesla is spending around $1bn a quarter, with the money mainly going towards setting up the Model 3 factory.

The Roadster and Semi definitely distracted from the Model 3 issues, but it could prove to be a major car crash for Tesla in the long run.

Musk could be putting too much on his plate, what with the two new models, resolving Model 3 problems, and running SpaceX and The Boring Company.

If Tesla is already spending $1bn a quarter getting the Model 3 up and running, imagine how much money will need to be spent to get the two new vehicles off the ground.

Tesla is already taking $50,000 deposits for the Roadster, which is set to be released in 2020.

The company is also asking people to pay a $250,000 payment upfront for the special Founders Series Roadsters.

This could give Tesla some money in the short term to help out with capital expenditure.

But, no doubt, Tesla will have to tap the markets again for some more money to build these future products.

Musk has done a phenomenal job convincing investors to play along, promising grand visions of the future where Tesla leads the way.

And the company’s fans are potentially more loyal than Apple’s.

It’s admirable for sure. However, his current plans are going to rely heavily on his vision to placate those investors.

Musk promised to “blow your mind” with his latest event, but not all in the market were convinced.

Cowen analyst Jeffrey Osborne said in a note last week that Tesla’s latest reveal “raised more questions than answers”.

Tesla could no doubt be a major success story in its quest to accelerate the adoption of sustainable energy, and it has already laid the groundwork to become a leader in driverless cars. The long term potential is good.

But if Musk can’t fix the current problems, and tries to go big too fast, he might end up alienating investors, who are fed up with production delays and unkept promises.

Tesla is going to need market support to raise capital, and to do that, Musk will need two hands on the wheel during the years ahead.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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