x Abu Dhabi, UAEWednesday 13 December 2017

Tesla should forget new vehicles and fix production woes instead

Elon Musk's electric car firm falls short on delivery dates while burning cash and launching new products

epa06335606 A handout photo made available by Tesla 16 November 2017, showing Tesla founder Elon Musk presenting the new Roadster electric sports vehicle (on background), presented to media 16 November 2017 at Tesla's Los Angeles design centre, Los Angeles, USA. Tesla says the Roadster will accelerate from 0-60 mph (or 0-96 km/h) in less than two seconds. Tesla says the new Roadster will cost 200,000 USD and will be released in some three years time. Tesla has began to take in orders for the new Roadster, and says new buyers will have to pay a 45,000 USD deposit. However, clients interested in buying one of the first 1,000 vehicles of the limited edition 'Founders Series' will have to pay 250,000 USD for the car.  EPA/TESLA HANDOUT  HANDOUT EDITORIAL USE ONLY/NO SALES
epa06335606 A handout photo made available by Tesla 16 November 2017, showing Tesla founder Elon Musk presenting the new Roadster electric sports vehicle (on background), presented to media 16 November 2017 at Tesla's Los Angeles design centre, Los Angeles, USA. Tesla says the Roadster will accelerate from 0-60 mph (or 0-96 km/h) in less than two seconds. Tesla says the new Roadster will cost 200,000 USD and will be released in some three years time. Tesla has began to take in orders for the new Roadster, and says new buyers will have to pay a 45,000 USD deposit. However, clients interested in buying one of the first 1,000 vehicles of the limited edition 'Founders Series' will have to pay 250,000 USD for the car. EPA/TESLA HANDOUT HANDOUT EDITORIAL USE ONLY/NO SALES

There was an element of The Wizard of Oz at play during last week’s Tesla truck unveiling, with Elon Musk playing the role of the titular magician.

The billionaire wunderkind wowed his audience, a group of reporters and other onlookers assembled Thursday night in an aircraft hangar outside Los Angeles, by revealing not one but two new electric vehicles.

The first was the Tesla Semi, a widely expected long-haul truck, while the other was the Roadster, a flashy new sports car that drove out from the back of the rig to the surprise of delighted observers.

It was classic showmanship worthy of Steve Jobs in Apple’s hey-day, where his famous “one more thing” catch-phrase would herald the unveiling of some magical new product.

But it was also reminiscent of an equally famous quote in the classic movie. When the mighty Oz is discovered to be an old man using smoke and mirrors to appear great and powerful, he tells Dorothy and her friends to “pay no attention to that man behind the curtain”.

So, yes, please do applaud the Semi truck and drool over the Roadster, but never mind the fact that Tesla can’t properly build its existing vehicles and deliver them on time.

Back in October, Mr Musk admitted to being in “production hell” with the Model 3, the car with which he hopes to enter the mass automobile market. With a base price of US$35,000, it’s the first Tesla that isn’t a luxury vehicle, which is why it quickly attracted more than 400,000 pre-orders after its announcement in July.

The company had planned to be in full production by the end of this year, cranking out 5,000 Model 3 cars a week, but it’s falling far short. As of the end of the third quarter, Tesla had delivered only about 220 of the vehicles, with the planned ramp-up delayed to March of next year.

Production bottlenecks, which Mr Musk blamed on an outside company that packages batteries into modules, has derailed that plan – at least temporarily.

To make matters worse, The Wall Street Journal also reported that Tesla was building “major portions” of the Model 3 by hand. The company vociferously denied the claim and accused the newspaper of attacking it with misleading articles.

Whether or not that’s the case, there’s no disputing Mr Musk’s company has a habit of missing production deadlines. Deliveries of both the Model S and Model X, its other two vehicles, were also pushed back from their initial targets.

So now, when he says production of the Semi and Roadster will begin in 2019 and 2020, respectively, well … Mr Musk will need to conjure up some new tricks if he’s to buck his own trend.

Tesla’s commitment to developing still more vehicles is concerning when it has to yet to master its existing line-up, which will inevitably further stress its already tenuous financial position.

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The company spent $1.1 billion on its car business in the most recent quarter and expects to spend a further $1bn in the current quarter, which means it could be down to about $1bn in cash reserves by early 2018.

As the Navigant analyst Sam Abuelsamid told The Verge website: “Tesla is burning cash at an alarming rate and another share sale or sale of more junk bonds would be problematic.”

That could be why Mr Musk has opened pre-orders on the Roadster. For a $50,000 deposit on the full $200,000 price, buyers can sign up for the promise of a sleek electric car that promises to go from zero to 100kph in just 1.9 seconds.

Tesla is also selling a thousand limited-edition Founders Series cars – a more powerful version of the Roadster – for $250,000, with the catch being that buyers have to pay the full amount upfront.

If that sounds like financial wizardry, it’s because it is. It’s a quick and easy way to raise a cool $250 million, which could go a long way to solving some of those production problems. Maybe.

It also sounds like a large-scale Kickstarter project, which Tesla cars unfortunately share a lot in common with – over-promised, under-delivered and always delayed.

The key difference between Tesla and Kickstarter is that one shoulders the hopes of a more sustainable planet while the other promises a slightly tastier potato salad.

The car industry is almost at a tipping point. Governments in a growing number of countries have announced or are planning full shifts away from petrol and diesel-burning cars, while almost every major manufacturer has an EV roadmap in place.

But the shift isn’t fully in place yet and could still revert back if forward momentum isn’t maintained. The world still needs Tesla to push change forward.

At this point, the company’s energies would be better spent on fixing existing problems rather than inviting more by stretching itself thin.

It won’t do anyone any good if Tesla and Mr Musk were to falter now, after they’ve come so close to ushering in a wave of real change.