Tesla shares drop as Model 3 production lags

Tesla enthusiasts have nothing to smile about following Elon Musk’s April Fools’ Day prank that the giant electric vehicle manufacturer had gone bankrupt after months of hitches that saw the long awaited Model 3 sedan compromise Tesla’s cash reserves.

After plummeting at a record high in monthly rates in seven years, the value of Tesla shares plunged by 8.1 percent on Monday, while the company’s unsecured bonds that were issued in August traded at all-time lows.

Model 3 production concerns

Earlier this week, experts were looking forward to reports from the company that the Model 3 production projected at 2,500 units by the last week of March had trailed.

From the face value, the emerging Model 3 troubles threaten Tesla’s performance far more than the recent fatal accident involving a Model X driver who was on Autopilot. The possibility of recalling the Model S and the undergoing investigations initiated by a US regulator have really weighed in on Musk’s sentiments.

According to analysts at Moody’s Investor Service and Jefferies Group LLC, Tesla may require $US 2 billion-$US3 billion ($2.6 billion-$3.9 billion) in capital. This is huge considering that the snail-slow process of building the company’s highly anticipated Model 3 has restricted its ROI that was to be channeled into building the company’s first mass production of its car.  

What appeared like a short term issue has evolved into months—three quarters to be precise. Philippe Houchois of Jefferies Group noted that Tesla’s management will have to design a proper funding strategy and work at reassuring investors that they have secured enough funds to complete the model and ramp up its production.

Through an email to employees early Monday, Musk explained that the electric vehicle maker may surpass its weekly projection of 2,000 Model 3 sedans, as reported by Jalopnik blog.

Musk was optimistic that the company would comfortably surpass that number in just a week. However, the company’s spokesman was not immediately available to respond on the new revelations.  

According to other analysts, Tesla’s stock may speed up in case its electric car production surpasses the low expectations of Wall Street. The Jalopnik report saw pared declines of the shares which traded lower at 5 percent to $US252.80 as of 2:43p.m in New York, despite the wide equity market selloff.

On Monday, Tesla’s 5.3 percent bonds expected to mature in 2025 traded at 86.9 cents against the dollar at 2:38 p.m. in New York, as per the bond price data provided by Trace.

A profitable joke

In March, stakeholders approved a $US2.6 billion pay package for Musk. The fortune of the 46-year old tycoon has tumbled since then, with the company’s shares plunging 22 percent last month, Tesla’s worst month since 2010.

Despite this, Musk hasn’t been deterred from sharing some funny tweets. In a recent post, the chief executive officer shared a photo of himself and a message saying he, Musk “was found passed out against a Tesla Model 3, surrounded by ‘Teslaquilla’ bottles, the tracks of dried tears still visible on his cheeks.”   

The latest posts and the April 1 joke where he said Tesla had “gone completely and totally bankrupt” have frustrated the company’s investor relations team. According to James Albertine, an analyst based at Consumer Edge Research, Musk’s remarks were “poorly timed”.

The Author

I took an interest in the Australian energy sector close to ten years ago and since then have monitored the trends, technologies and direction of the Australian Energy Market. I was drawn to the Australian solar market in 2008 and since then have worked heavily in the field. I am partnered with national and international solar energy companies, from manufacturers of solar panel and inverter technology, online software developers that introduce tools to quote, monitor and manage solar power systems and media organisations who like myself, closely monitor the solar and renewable energy sector.