When we look back in years to come Tesla will go down as a groundbreaking technology/automobile company which literally changed the world for electric cars. That tends to be the case for groundbreaking companies which are not necessarily appreciated at the time but only on reflection. However, while Tesla has raised billions of dollars from shareholders (and is likely to need more in the future) Elon Musk continues to pull rabbits out of the hat.
The Gigafactory is open for business
Tesla’s much heralded Gigafactory opened for business earlier this month creating yet another business stream for the company. This project, with partner Panasonic Corporation, will roll out an array of technologically groundbreaking lithium ion batteries in Sparks, Nevada. It is sometimes easy to forget that Tesla has the main car manufacturing business, a newly acquired solar power business and the battery production operation is now online.
The shares have rallied from a November low of around $180 touching a recent high in excess of $250 as the public perception of the company greatly improved. Analysts have been rather volatile with regards to their recommendations for the company with many turning positive last year only to turn negative or neutral this year. Indeed some “professional investors” have ridiculed the company’s business model and taken out some significant put options.
Missed sales targets
There is no doubt that Tesla has missed an array of targets in recent years but the reality is that many of these targets were ambitious. Elon Musk is not a stereotypical CEO because he likes to push the company to new highs rather than catch low hanging fruit. Some of the more ambitious sales targets have been reigned in of late as the company perhaps begins to focus on yet another round of fundraising in the not too distant future.
The Tesla Model 3 is due to start production this year and has been put forward as the company’s mass market vehicle. There has been some debate and some concern that the base price of around $35,000 is unprofitable but time will tell. One issue, which will be resolved by the opening of the new Gigafactory, is the reduced cost of battery packs when scaling up production. It was also interesting to see the massive demand for the Tesla Model 3 and the number of people willing to put down a deposit. However, it was also interesting to note that these deposits are actually refundable so perhaps this launch was more of a PR stunt as opposed to a business campaign?
Elon Musk just gets it right!
If we look at the leading entrepreneurs they are very focused, very determined and do things their own way. Time and time again they can attract ridicule in the early stages of a business development only to pull rabbits out of the hat along the way and maintain investor and analyst support. It will be interesting to see how Tesla progresses in the next couple of years because these are crucial times for the company. It has a cash burn of billions of dollars per annum although there are high hopes that the Tesla Model 3 will help to improve cash flow in the medium to longer term.
Things may not always go to plan, ambitious targets have been missed but never write off the man who is Elon Musk!