EV Engineering News

True Super-Hero Tales: Can Tesla survive the new Valley of Death?

Whatever happens next, Tesla made automotive history last week.

At last count, the Disruptors of Detroit had received over 325,000 reservations for their new super-vehicle. That’s nearly three times the total number of plug-in vehicles sold in the US last year (116,099), and it’s similar to the annual sales of some of the country’s top-selling cars, such as the Ford Fusion (#6 in 2015, with 300,170 sales) and Nissan Altima (#5 with 333,398).

“We’ve never seen anything quite like this in the auto industry,” said Edmunds Senior Analyst Jessica Caldwell. “It is unprecedented.”

“It’s a watershed moment for rethinking vehicles altogether,” said James McQuivey, an auto analyst at Forrester.

However, Tesla’s great success has spawned a great challenge, one that will surely be a make-or-break deal for the company. There’s no knowing what the order book will look like in 2018, when Model 3 deliveries are scheduled to begin, but even a moderately optimistic scenario would have Tesla cranking out 250,000 cars per year, five times as many as it delivered in 2015.

Tesla Model S - Charged EVs

Can the super-hero team ramp up production fast enough? Ominously, the company missed its delivery target for the first quarter of 2016 – Tesla reported this week that it had delivered 14,820 vehicles in Q1, just short of its target of 16,000.

Tesla admitted that its “hubris in adding far too much new technology” to Model X was part of the problem. Other reasons for the miss were “severe Model X supplier parts shortages [and] not having broad enough internal capability to manufacture the parts in-house.”

The company assures us that it remains on track to deliver 80,000 to 90,000 vehicles in 2016, and that it is “addressing all three root causes to ensure that these mistakes are not repeated with the Model 3 launch.”

Some analysts are skeptical, noting that Tesla will burn a lot of cash to crank up the production lines, and that revenue from deliveries is many months away. This situation, familiar to any follower of young and dynamic companies, is a valid cause for concern, but remember, the Trendsetters of Transportation have already been through this Valley of Death several times – with the Roadster, Model S and to a lesser extent with Model X.

A week after the unveil, TSLA shares continue to levitate, so investors seem confident that the Seer of Silicon Valley and his league of extraordinary businesspeople will make it through that old lonesome valley once more, to reach the promised land of mass EV sales.

 

Sources: Tesla, Washington Post, Business Insider, InsideEVs, Good Car Bad Car

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