Tesla Motors Inc (NASDAQ:O:TSLA) has the magic of attracting the consumers with its innovative electric vehicles. The electric vehicle maker might not be in a position to match the volume produced by other automakers in the world. However, it had the knack of fulfilling the consumer’s expectations. Until last year, the company had only one car, Model S. After much delay, its CEO, Elon Musk, has unveiled the much-awaited Model X sports utility vehicle towards the end of September.
Though everyone was aware of the features, experiencing those features meant a dream comes true for the consumers. Now, Tesla Motors Inc (NASDAQ:TSLA) has not only become a two-car maker but will also become a three car maker next year after it proposes to unveil Model 3 electric vehicle for the mass market. The year ahead would be dictated by the SUV, as well as, Model 3 cars. Let’ also look at some of the recent developments that will lead to the road ahead.
Production And Delivery Targets
It was a known fact that the electric vehicle maker could not meet the production, as well as, the delivery targets set for the year 2014. Similar is the most likely case in the current year too. For instance, Tesla Motors Inc (NASDAQ:TSLA) has initially kept a delivery target of 55,000 vehicles for the current year. During the first half also, the company maintained its target. However, it slashed it to 50,000 – 55,000 vehicles for the current year. Even this could be difficult to achieve though lower end of the target is quite possible and achievable. Interestingly, Street analysts are also comfortable with the delivery target of 50,000 vehicles. Even 52,000 – 53,000 vehicles would be a tough proposition to achieve.
Therefore, the need of the hour for Tesla Motors Inc (NASDAQ:TSLA) is to achieve the target it has disclosed. In the current year, the delay in the launch of Model X played its part. The company is on the verge of completing its Gigafactory and is planning to unveil the Model 3 vehicles before the end of the first quarter. The company claimed that it was going ahead of the schedule. However, the electric vehicle maker needs to ensure few things to achieve their delivery target. It is a well-known fact that Musk is nursing with strong ambitions that required cash requirements. Therefore, the company needs to make sure that there was sufficient amount of cash for the plans ahead. Though the energy storage business is termed as promising, it is tough to predict the time frame for paying anytime in the near or mid-term.
Optimistic Annual Target
Tesla Motors Inc (NASDAQ:TSLA) has an optimistic annual target of 500,000 cars per year by the turn of the year 2020. The company might be lagging behind the conventional automobile manufacturers like General Motors Company (NYSE:N:GM) or Ford Motor Company (NYSE:N:F) in producing less number of vehicles than the electric vehicle maker. However, it has built exciting models and is better in developing the waiting lists for cars as there have been no issues in respect of demand. Though conventional automakers also have issues of productions, Tesla’s case appears to be a chronic one. That was one of the reasons for analysts or investors to develop doubts about reaching the production target.
Also, Tesla Motors Inc (NASDAQ:TSLA)’s Musk has stressed that it was important to push its Model X to a point from where it can plan the launch of its Model 3. In the absence of the mass market vehicle, it would look like a premium-based carmaker on the lines of Toyota Motor Corp Ltd Ord (T:7203) or Ferrari NV (NYSE:N:RACE) or Porsche Automobil Holding VZO (DE:PSHG_p). Unlike its SUV cars, which cost $100,000, its mass market vehicle will cost less than $50,000 so that it could attract more consumers. However, analysts like Adam Jonas of Morgan Stanley were not convinced of Musk’s plan will deliver the expected results. The analysts see the niche and nothing beyond that. However, there is no alternative but to take the words of Musk though there might be some delay in achieving the goals. The principal task appears to be transformative than merely a maker of playthings.
A Lot Rest On Future Models
In a way, it would not be wrong to say that Tesla Motors Inc (NASDAQ:TSLA)’s further progress depends much on Model X. Looking even more forward, the Model 3 is instrumental to the 2020 goal of 500K vehicles. If the company manages to succeed, then it would earn a name for itself for establishing a new market, as well as, the future market definition. That was to launch the luxury electric vehicles to be followed by the mass-market cars. The company has also taken utmost care to offer more than weapons-grade AC or sexy seats. Musk has set a mission for its Model X. Therefore, everyone would be focusing their attention as to how he is going to accomplish the mission successfully.
For one thing, Tesla Motors Inc (NASDAQ:TSLA) must be given due compliments. It was able to survive and recorded prosperity whereas most of the other startups of electric car makers have gone into oblivion. In fact, it was because of Tesla, others like General Motors Company (NYSE:GM) have brought back their plan of making electric vehicles. It is now enjoying a market cap of slightly above $30 billion level, which is the same for Hyundai that makes close to four million cars annually.
Conclusion
One of the favorable points is that Tesla Motors Inc (NASDAQ:TSLA) has established quality product and has an ambitious plan of making the Model 3 for the mass market. So far, the company has realized its dream of fulfilling the consumers’ aspirations though it might have lagged behind in delivery schedule. Now that the company indicated that it would launch mass market product ahead of schedule, there could be some hopes that the current year delivery might be attainable. However, given the experiences, it might struggle. The company remains aggressively valuated and could be prone to large swings given the forward multiple assigned to future earnings, that have yet to transpire.
Disclaimer: The opinions and data expressed herein by the author are not an investment recommendation and are not meant to be relied upon in investment decisions. The author is not acting in an investment advisory capacity, nor is this an investment research report. The author’s opinions expressed herein address only select aspects of potential investment in securities of the company or companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies’ SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice.