Tesla in Trouble? Here's Why the Company Is in Danger of Failing
For years now, Tesla has been front and center when it comes to the automotive spotlight. It’s rare that a week goes by without the company grabbing headlines for some innovation or another. It’s been instrumental in the acceptance of electric cars. It clearly has automotive world scared. But is this Silicon Valley disrupter running on borrowed time?
The past year has been a big one for Tesla as it continues to lay out a plan for its future. But is its outlook a realistic one? As inspirational as it may be, the company also has some very big problems. Here’s a quick rundown of the dragons Tesla needs to slay if it wants to succeed.
1. Money woes
Elon Musk, CEO of Tesla | Kevork Djansezian/Getty Images
Tesla has captured the imagination of car buyers and investors alike. But while the company has the flexibility of a startup, it’s spending like a major automaker. Since 2016, the company has been spending an average $8,000 per minute while failing to turn a profit. If this keeps up, the company will be insolvent by Aug. 6, 2018. The company is seeking to raise $2 billion by mid-2018. This could also be why it’s unveiling models that won’t be here for several years, yet it’s still taking deposits on them.
Tesla Model S Autopilot | Tesla
While recent developments, such as the world’s largest battery and hurricane relief for Puerto Rico, have been much-needed positive press, the company spent most of 2017 mired down in lawsuits. On top of a messy case alleging that Tesla’s Autopilot system may have been involved in a fatal crash in May 2016, others have since put the company on the defensive. One suit alleges that the Freemont, California, plant is a “hotbed for racist behavior.” Another claims bias against LGBTQ workers. Finally, the company is being sued for allegedly firing pro-union workers with ties to the UAW. If Tesla wants to maintain its utopian image, it needs to tackle these issues immediately.
3. Production trouble
European-spec Tesla Model S | Guus Schoonewille/AFP/Getty Images
Since 2015, Tesla has been building over 50,000 cars a year. That’s an impressive feat for a startup automaker. But with the Model 3, it hopes to be selling 500,000 cars a year — on top of Model S and X sales. To do this, it needs to greatly expand its Freemont plant. What’s more, reports that Model 3s are largely being hand-built suggests production on any scale is far from being ready.
4. Failure to deliver
A Tesla showroom and Amazon bookstore at the University Town Center mall | Megan Elliott/The Cheat Sheet
Tesla may position itself to be the company of the future, but more often than not it’s late. In 2012, the Tesla Model S was six months late. In 2016, the Model X was a full two years late. And with production at a trickle, most Model 3 owners will receive their cars a year after they were originally promised. As a result, a number of reservation holders are jumping ship as the company fails to deliver as advertised. The longer it takes to ramp up production, the more people will be asking for their $1,000 deposits back.
5. Reliability ratings
2017 Tesla Model X | Tesla
Tesla’s cornerstone model, the Model S, has been around since 2012. And in those five years, we’ve gotten a full picture of the car’s reliability. Frankly, this isn’t Tesla’s strong suit. The newer Model X is still beset with quality issues, which dragged the company to the bottom of Consumer Reports’ annual reliability list. And while the Model S has never had a bad reputation, it’s still been saddled with its share of glitches and malfunctions.
So far, Tesla owners are still generally early adopters — customers who believe in the company and are willing to give it some leeway. And to its credit, Tesla is generally proactive with fixing any reported problems as quickly as possible. But the Model 3 and its production goal of 500,000-plus cars a year will put Tesla into Ford and Toyota territory. And buyers of those cars are far less forgiving when it comes to early-model quality issues. If Tesla hopes to succeed, it really needs to step things up.
6. Low battery?
Tesla Powerwall battery | Hannah Peters/Getty Images
While the Tesla Model 3 was officially launched in summer 2017, it’s been mired in what company chief Elon Musk has dubbed “production hell.” What’s the problem? A lithium-ion battery shortage. And while the company claims the issue has been solved for now, there’s still a major problem: A scarcity of resources. Deutsche Bank estimates there’s 185 years’ worth of lithium reserves available in the ground. But even today, mines are struggling to keep up with current demand. Unless lithium mining is stepped up on an exponential level, it looks like Tesla and other automakers will be in and out of “production hell” as demand for EVs increases.
7. Investor interest
Tesla Model S | Johannes Eisele/AFP/Getty Images
In the estimation of financial site Seeking Alpha: “Tesla has managed to behave like a private company while being traded on the public markets.” Right now, the company’s biggest asset is its potential. It sells a vision of the future that’s proven to be intoxicating to investors. At the heart of this is the Model 3. For years now, the car has had the potential to change everything. Now that it’s on the verge of arriving, it’s on Tesla to make good on all of its promises. If it can’t, then it could be set up for a very big fall.
8. Tesla semi truck
A Tesla Semi Truck | Tesla
Tesla has been working on a fast, long-range, semi-autonomous semi truck that could transform our highways forever. And while it’s certainly impressive, Musk promises the first trucks will be here by the end of 2019. Seeing how the company has rarely been able to meet its own timetables and has a history of early vehicle reliability issues — and initial estimates price the Semi at significantly higher than gas-powered trucks — this could be a very tall order.
9. Tesla Model 3
Tesla Model 3 | Tesla
The Tesla Model 3 is officially here — for a few hundred people. Despite a glitzy launch party in July 2017, Model 3s are still trickling out of the Fremont plant. Amid the aforementioned reports of cars being hand-built, production bottlenecks, and increasing delays for the almost 400,000 reservation holders. Make no mistake, the Model 3 needs to be a home run for Tesla to succeed. Early stumbles are unfortunately casting doubt that it can live up to its lofty expectations.
10. Tesla Roadster
Tesla Roadster | Tesla
Tesla’s latest car, the next-generation Roadster, almost seems too good to be true. Slated to arrive in 2020, the Roadster will go 620 miles on a charge, go from zero to 60 in 1.9 seconds, and will cost around $250,000. If Tesla can do it, the Roadster would be one of the most significant sports cars in automotive history. But again, this is less than two years away. And while the performance specs actually do seem attainable, the idea that Tesla can overcome its “production hell,” rebound from its bad PR, hit its production goals, roll out the Model 3 and Semi Truck, and keep investor interest high, all add up to one tall order. We want to see Tesla succeed. But it has a lot it needs to do before it can deliver on its vision of a better automotive future.
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