Tesla’s (NASDAQ:TSLA) Elon Musk Camping Out in “Production Hell”

Tesla’s (NASDAQ:TSLA) Elon Musk Camping Out in “Production Hell”

Tesla’s (NASDAQ:TSLA) Elon Musk Camping Out in “Production Hell”

$TSLA

Each time Tesla’s (NASDAQ:TSLA) Elon Musk opens his mouth or sends a shareholder letter it proves that he is a hypmeister for his failing rentier companies.

Last Wednesday, when Mr. Musk took questions from Wall Street analysts during Tesla’s grim Q-3 financial results conference call he spoke to the extent of his distrust for journalists when he criticized stories that Tesla fired 700 employees as production of the intended-high volume Model 3 began.

If there was anything to report, he said, it’s that Tesla fired about 2% of its workforce of about 33,000.

“Any journalist writing these stories should be ashamed of himself,” Mr. Musk said.

“Every company has performance reviews. Our standards are so high not because we like being mean to people; our standards are high because otherwise, we will die.”

Mr. Musk is able to make deals, leverage the future with promises of a glowing success of his failing of his EV company. So, much so that he has seen a steady flow of investment cash and a market cap higher than Ford Motor Company’s (NYSE:F), and once even higher than General Motors (NYSE:GM).

I expect this to end with a big thump when it does end, as all rentier businesses fail.

Last Wednesday’s Tesla Q -3 earnings call was open to Wall Street analysts’ questions.

We had to listen in and grind our teeth at the softball questions from the press. We wanted to know about the untested Tesla Model 3 assembly line that was sitting in its manufacturer’s Michigan factory. The Big Q was brushed off.

Mr. Musk called the Tesla Model 3’s launch “Production Hell.” And that he was camped out on the roof of the beleaguered factory to be close to it.

In past Quarters, Mr. Musk projected that the new assembly line would be building Model 3’s at the rate of 10,000 per week by the end of Y 2017.

Tesla delivered 220 Model 3’s in Q-3.

Tesla now expects to reach 5,000 Model 3’s per week by the end of Q-4 of Y 2018, Mr. Musk said. ”

Model 3 production is easier than Model S production, and “vastly” easier than Model X, he said, in part because it’s modular, with battery cell production at the Gigafactory consisting of 4 zones that have problems

“Zones Three and Four are in good shape. Zones One and Two are not. Zone Two in particular—the subcontractor really dropped the ball and we did not realize how much the ball was dropped until recently. We had to rewrite all that software, 20 to 30 man-years of software in four weeks.”

“Is it worth your time trying to claw back some of these costs” from the subcontractor? Asked PiperJaffray’s Alexander Potter.

No, Mr. Musk replied. In the end, it was his mistake for choosing the faulty subcontractor.

Morgan Stanley analyst Adam Jonas, ever the hard-hitting inquisitor, asked Mr. Musk for specifics about production hell: “How hot is it?”

“Let’s say that Level Nine is the worst. We were at Level Nine,” Mr. Musk replied.

“We’re probably at Level Eight right now. I wish I could say ‘Level Seven.’ It’s obvious what we need to do. It’s just a matter of how to get to it.”

It’s all about robot calibration issues, Mr. Musk added. He repeatedly referred to the need for lightning-fast robots. If you can see them move without a strobe light, they are too slow.

Note: The M-3’s that are produced are made mostly by hand, no robots at work there.

Mr. Musk also addressed plans for Chinese production so that Tesla Models 3 and Y (the sport/utility based off the 3) could be sold in there without suffering 25% import duties.

“Don’t set your watch by this,” Mr. Musk said with a remarkable degree of self-realization, “but rough production starts in about 3 years.”

That is if the company is around in its present form in 3 years.

Hang on, I forgot to mention that Tesla is burning money like it is free, and will never end, it will end Mr. Musk.  Count on that and it will be your speculating stakeholders that will be burned.

At this point we have to ask whether Tesla Models 3 and Y built in China for the world’s largest market could also be cheaper coming out of China for other markets, and maybe cut a level or 2 off the Production Hell chart.

Again, hypemeister Musk seems to have satisfied Wall Street analysts for yet another Quarter, despite losing a record $619.4-M for the company.

Some analysts displayed skepticism in here, and so Tesla common stock closed 6.8% lower Thursday, to 299.26.

And now comes the issue that the $7,500 federal tax credit for EVs could/will likely become a victim of the GOP tax reform plan.

Whatever happens to the tax credit, promised production levels of 1,000 units per week remain a long way away, but if the EV revolution takes hold, Mr. Musk expects Tesla to become the GM of EVs,

Sure Elon, like GM is going to fade to Black.

Symbol Last Trade Date Change Open High Low Volume
NASDAQ:TSLA 306.09 3 November 2017 6.83 299.5 306.25 295.13 8,893,900
HeffX-LTN Analysis for TSLA: Overall Short Intermediate Long
Bearish (-0.37) Bearish (-0.44) Bearish (-0.27) Bearish (-0.39)

Have a terrific week.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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