A company with an erratic founder, significant turnover with direct reports that includes key executives, level of care and questionable strategy will usually trigger investors' alarm bells. Tesla (NASDAQ: TSLA) Managing Director Elon Musk has dismissed these concerns with bold reiterations of Tesla's outlook, and his assertion that elements of annual and quarterly reports are outstanding. But the company's basic factors indicate that they are not. Worse, Tesla's cool factor and novelty may be about to run out.
Competition from all sides
Tesla has dominated the US EV market in the 11 years since it created that market. And so far, Tesla has been the largest occupant of a largely empty space. That is about to change .
The definitive wave of EVs from major players will hit the United States by 2020. They are cheaper than Tesla's, often offering similar performance, ranging from reasonably compact players, to seven passengers, to a pickup truck. And these mass market offerings are accompanied by more expensive, sexier players from Europe's most reputable carmakers, with stories (unlike Tesla) about delivering on time.
Cheaper models include a pared-down Mini Cooper and waited anxiously for 2020 Ford (NYSE: F) Bronco Scout, both under $ 30,000. And Volvo designed Polestar to eat away at the Model 3 market, which accounts for most of Tesla's sales.
Serious threats on the right include Mercedes & # 39; s (OTC: DDAIF) launch of Holy Grail for upscale, eco-friendly families: a minivan. Porsche (OTC: POAHY) throws in an EV SUV next to his Turbo Taycan sports car. Even Aston Martin comes into play, with a $ 200,000 plus EV.
And suddenly, just like that, Tesla faces a number of worthy competitors for each vehicle of its choice – and delivers first-mover status to the body types it hasn't launched yet.
The timing couldn't be worse
So what's next for Tesla as it loses the benefit of first reading status? Growing pain, it seems. Tesla replaced the niche luxury market for the mass market in 2018 with the launch of $ 3,000,000 Model 3. A Tesla purchase at that price was irresistible but not sustainable, it turns out due to production delays and higher than expected costs.
The company launched a new pricing model in April that pared back premium features on the Standard T3 at a cost of $ 38,000. The company tried to steer drivers to more expensive T3 models with premium features, such as the fully loaded Standard Plus at $ 51,200, and the fully loaded Long Range for $ 61,2000. It is not yet clear how irresistible the Model 3 will be at the more profitable price points. With Model 3 accounting for 93.5% of Tesla sales in 1Q19 and 80.8% of Tesla sales in Q2 2019, that is a huge question. .
Musk has confirmed Tesla's guidance of 360,000-400,000 total vehicle deliveries in 2019, but softening sales argue against it. When calculating InsideEV, sales have slowed. A lot. Tesla's delivery figures for the first half of 2019 of 158,714 will include InsideEV's June deliveries estimate of 21,225. Following the same estimates, things went up in July and August, with deliveries of 13,450 and 13,150, respectively. If those numbers hold up, Tesla will have to deliver at least 174,687 vehicles in the rear half of 2019, including the more expensive and more profitable QS and QX. It can be challenging. In late September, Musk told employees that the company "fired" to deliver 100,000 Tesla vehicles in the third quarter. But given our earlier statements, we will wait and see if it turns out to be true.
Model 3 has proved a costly car
Tesla has already paid dearly for Model 3. As Model 3 sales fell and a too low price point reduced profits, the company lost a total 1.11 billion dollars in the first half of 2019. Tesla has aggressively cut costs by hiding stores, selling online and reducing financial allocations to various divisions to increase cash flow. These were public capital markets, but the $ 2.4 billion Tesla raised may not be enough. That capital infusion wasn't the "contingency buffer" Musk had said it would be. It was a last-ditch effort to counteract a combustion rate that would otherwise level the company. according to a staff note leaked to EV news site Electrek.
When Tesla announces its third-quarter results, investors will have a better chance of measuring Tesla's immediate future and determining whether a continued investment is earned. That assessment will not be easy. Investors have always bought into what's next for Tesla, not what's next. In a recently crowded electric vehicle market, these investors have one factor to consider.