Lately the Tesla Motors Inc. stock has been plunging ahead of its Q4 earnings call on February 10th. Over the past three months the stock has lost over a quarter of its value. We dare not speculate the root cause of the stock’s meltdown but the company has experienced some setbacks and production woes since its first introduction in June 2012.
Early in January 2015 we tested the Tesla Model S and it was a blast! The pure electric sedan is an automotive revolution and has gained a core of diehard followers and winning many awards since its inception. Adding to the accolades, the National Highway Traffic Safety Administration (NHTSA) gave it a 5 star crash safety rating, which Tesla was quick to claim as the safest car NHTSA ever tested.
Starting with late 2013, reports of vehicle fires popped up related to the Model S’ array of lithium-ion battery packs. In October 2013, while traveling on the highway, a Model S driver struck a metal object, which punctured a hole through the 1/4 inch metal plate on the underside of the car, starting a fire in the battery compartment. There were no injuries in this instance and the report stated that the fire never entered the passenger compartment.
Another incident occurred in November 2013 where a Model S struck a tow hitch and punctured the battery compartment, which eventually caused a fire. The driver was also unharmed in this case. As a result of these instances, Tesla Motors expanded the warranty to protect from fire damage while also upgrading newer cars with better battery armor plating and better safeguards.
The Model S has been sold in 15 countries with 60% of the vehicles sold in the United States. Norway sold the second highest amount with less than 10% of total sales. At the end of 2015 there has been a total of more than 107,000 units sold in those markets. This number could have been larger had they understood the Chinese market a little better.
Sales in China missed expectations as many orders went unfulfilled. The lack of sales was blamed on China’s infrastructure which was ill equipped to support electric vehicles. Elon Musk also attributed the sluggish sales to the poor consumer education on the ease of charging.
Consumer Reports Rating
Things got worse for Tesla Motors when Consumer Reports withdrew their recommendation in October of 2015, based on a survey of 1400 owner’s responses. The “Not Recommended” rating was driven by the forecast of “worse-than-average overall problem rate” when owning the vehicle.
The main problem areas involved the drivetrain, power equipment, charging equipment, giant iPad-like center console, and body and sunroof squeaks, rattles, and leaks. Specific areas that scored worse on the 2015 model, compared with the 2014 model in last year’s survey, were the climate control, steering, and suspension systems. Complaints about the drive system have also increased as the cars have aged—specifically for the 2013 model, which was the car’s first full model year.
Aside from Consumer Reports’ rating and fire woes, Tesla Motors have added a new trim to their lineup, the P90D. This top of the line Models S clocks in at $140,000 and posses a dual electric motor, all-wheel drive setup. It comes programmed with “Ludicrous” mode, enabling drivers to reach 0-60 mph in 2.8 seconds. In case you don’t understand how fast those numbers mean, check out the video below where the P90D toasted a 707 horsepower Dodge Challenger Hellcat.
Model X Production Issues
While most of the attention has been on the Model S smashing acceleration records, the Model X, which is Tesla Motors first foray into the sport utility vehicle, has been fraught with production delays. The initial release was planned for late 2014 and eventually slipped to late 2015. The delay was blamed on the production of the unique “Falcon-wing” doors for its rear passengers. The doors are similar to the Gull-wing design with the exception of an extra point of articulation, allowing it to open while in very tight spaces.
Recently, Tesla Motors filed a federal lawsuit against a German auto parts supplier, Hoerbiger Automotive Comfort Systems LLC, for misrepresenting its ability to make these unique rear doors. Tesla Motors stated that Hoerbiger failed to produce a working prototype that lived up to Tesla’s engineering standards. The lawsuit stated that “the prototypes leaked oil and sagged or produced excessive heat, causing them to stop working.” The inadequate door design caused Tesla Motors to redesign and retool costing them millions of dollars.
Despite delays, the Model X has slowly trickled out, delivering a paltry 208 units in the first quarter of sales. Tesla Motors claimed in the last week of 2015, production ramped up exponentially producing 238 Model X units per week. In case you don’t believe the Model X is coming to your neighborhood, here’s a picture from an article by Pursuitist claiming Jaden Smith buying the first pure electric SUV.
The next frontier for Tesla is the Model 3, which is expected to be a downscaled Model S for the masses. The upscale Model S and Model X both come in well over the $80,000 mark, leaving the market wide open for competitors like the Nissan Leaf and a multitude of hybrids. The Model 3’s price point is expected to be at a more affordable $35,000, however, this price is highly dependent on the success of the Gigafactory:
In cooperation with Panasonic and other strategic partners, the Gigafactory will produce batteries for significantly less cost using economies of scale, innovative manufacturing, reduction of waste, and the simple optimization of locating most manufacturing process under one roof. We expect to drive down the per kilowatt hour (kWh) cost of our battery pack by more than 30 percent. The Gigafactory will also be powered by renewable energy sources, with the goal of achieving net zero energy.
Even at the $35,000 mark the Model 3 will face many challenges, as General Motors have unveiled plans for the Chevrolet Bolt, a $30,000 pure electric vehicle with an estimated range of 200 miles on a single charge. GM expects the Bolt to enter production in late 2016, while Tesla Motors is expecting the Model 3 to enter the market in 2017.
Tesla Motors have got their work cut out for them. The falling prices of oil does not help Tesla Motors’ bottom line as traditional cars become cheaper to operate. However, the fantastic technology and innovation that has come out of Tesla has really pushed the boundaries on self-driving cars. When fully autonomous driving becomes the norm, Tesla Motors, alongside Google and Mercedes Benz will have a huge lead on other companies. Performance wise, if the Model 3 can harness “Ludicrous” mode, then it’s really the competition that has something to worry about.