Will corporate volatility impact Tesla’s Master Plan, Part Deux?

A new Automotive World report considers the opportunities and challenges facing Tesla. By Martin Kahl

It’s a busy time for the Tesla corporate communications team, and it shows no sign of letting up. Once hailed as the great automotive industry disrupter, much of the Tesla-related coverage currently focuses on the range of problems the company faces, including production, delivery and quality issues, as well as missed targets and financial impropriety.

That so much attention continues to be paid to such a small player in the global automotive industry underlines the excitement that surrounds the brand. In 2017, Tesla delivered 103,000 vehicles across three models; by contrast, Porsche delivered 246,000 vehicles in 2017, BMW sold 291,900 units of the 5 Series alone, and Mercedes sold 70,000 units of the S-Class Saloon in a model change year.

Led very publicly from the top by Twitter fan Elon Musk, who until recently held the position of company Chairman as well as Chief Executive of the company, Tesla is targeting annual output of 1 million units per annum by 2020, by when it intends to have grown the model range, with the addition of the Model Y and a new Roadster. It also plans to launch a battery electric heavy-duty truck and add new production operations.

Despite the seriousness of a recent SEC investigation and findings that led to Musk being reprimanded, fined and losing the company’s chairmanship, he remains the public face of Tesla, better known than perhaps any other automaker chief executive.

A new Automotive World report examines the company’s strategy through to 2022. On Tesla’s targets, report author Jonathan Storey commented: “Is it possible to have high confidence in a forecast for such a volatile, opinion-dividing company such as Tesla? Bluntly, no. However, while discussions around Tesla tend to generate more heat than light, there are a few hard facts to which this report can turn, in developing a forecast for the five years to 2022. These include the fact that Tesla is a car maker, not a digital or software company as some have suggested. As such, its expansion is subject to the same constraints as all other car makers.”

Storey added that, even on the most optimistic demand assumptions, “These supply constraints will keep Tesla’s output substantially below the 1 million upa once targeted for 2020.”

Musk polarises opinion like few other company CEOs, and it is fair to say that his omnipresence and hands-on, hands-everywhere management style have led to the company’s success in creating a car brand with a market capitalisation of US$53bn, while also holding the company back from following a more traditional, cautious, longer-term strategy with genuine longevity.

Tesla likes to project an image of itself as a tech company that moves in FAANG (Facebook, Amazon, Apple, Netflix and Google) circles, but in reality, it is a car company; it owns and operates fixed assets for car design, development and production, and it sells tangible products, namely cars.

The company does however benefit from an image as an exciting and ambitious innovator, with a valuation to support this. As report author Storey points out in this exclusive Automotive World report, however, “The share price is of course a reflection of expectations about its future, not its loss-making past”.

What Tesla does to tackle its Model 3 delivery issues, solve its serious assembly and quality problems, and clarify its future model and production targets will determine the company’s future, and all that hinges on its multi-billion-dollar valuation.

To learn more about the opportunities and challenges facing Tesla over the next five years, download Automotive World’s latest Strategy update: Tesla – 2018 edition

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