Tesla’s CEO, Elon Musk, enjoys making big and bold predictions about how his cars are going to revolutionize everything. He talks a big game but does he deliver on the promises he makes? That’s a question Colin Rusch, Oppenheimer’s lead sustainable energy tech analyst, asked on CNBC Thursday morning.
“We discount what he says pretty substantially,” Rusch said. He does not trust the things Musk says because he has not seen the Tesla CEO deliver on the forecasts he promised.
“If they solve the problem of getting a Roadster to … [space], they can probably do the same with providing guidance to us on timing,” Rusch said. “But, they’re not, right? They don’t really know what the issues are at this point, and, in terms of the automation and solving that, they talked about having some of these machines in Germany right now and then, you know, looking at getting those problems solved and getting those things on a boat and actually implemented, you know, we’re not looking until Q3.”
Rusch said the company is hedging some of their production timelines. “We’re not totally surprised by that,” Rusch said. “We’re modeling that in our estimates. And we expect them to have ongoing problems.” He stated he sees two issues with the stock.
“One is what they’re setting up with the street in terms of guiding all of us to what they’re going to do and then what they’re going to do relative to the automakers,” Rusch said. “It’s an ongoing issue.” He stated the biggest issue is what they’re doing relative to other automakers in the industry.
“And what we’re seeing the automakers do is make kind of incremental steps toward EVs and autonomous vehicles, you know, not walking terribly quickly,” Rusch said. “And so, the question is how fast does Tesla actually execute on this relative to those other automakers.” He said he takes a very conservative view of the Tesla stock.
“We had about a thousand Model 3s in our original 2017 estimates,” Rusch said. “We didn’t really buy the fact they were going to be able to execute on that. So, they did a little bit better than we expected. You know, we just took down numbers, again, on 2018 Model 3s were at $40,000. I think that may go lower again. So, we’re just cautious around what they’re able to do. And again, same thing with gross margins. You know, there was a pretty disappointing number in terms of the Model S and Model X, and they’ve got some wood to chop there in terms of cost reduction and getting the mix back to a place where they can support 25 percent gross margins.”
Rusch says 2019 will be the year when you see cars really compete with the Model 3 and the S and X out in the market. “And so, it’s been curious to us to see automakers move so slowly in terms of doing it because they can make cars pretty effectively and they can make EVs effectively but they just haven’t. And so, the question is really are they cannibalizing their own vehicles with these new cars?”
Rusch’s comments come after Tesla shares fell 0.4 percent to $343.70 in New York at 8:14 a.m. Thursday morning. With Tesla finishing the fourth quarter with around $3.4 billion, that does not bode well for them when they are planning to spend in capital expenditures a sum exceeding $3.4 billion this year. They spent that much during 2017 too.
Tesla believes it can manufacture 5,000 Model 3 sedans each week before the end of June, but that’s a target which continues to be delayed by Musk. The company will not double its production before getting to that goalpost. ARK Investment Management Analyst Tasha Keeney concludes a different ending to the story rather than what Rusch was saying.
“All the cash concerns will be alleviated once they get these cars on the road,” she said. While she may be right, it will still take time to see what exactly comes from the uncertain direction of the company.
About the author: Tommy Zimmer is a writer whose work has appeared online and in print. His work covers a variety of topics, including politics, economics, health and wellness, addiction and recovery, and the entertainment industry.