Tesla Motors Inc (TSLA) is an amazing company, the Tesla Model S sedan is an amazing car and CEO Elon Musk is an amazing entrepreneur. And I’m sure the Tesla Model X will be equally amazing to me once I get to sit in one.
But TSLA stock has capitalized about as much as it can on the “amazing” factor, and now it’s going to be time to start delivering real-world profits and sales. And sadly, the story of Tesla stock is going to become one of production bottlenecks and logistical challenges instead of a narrative about the vehicles themselves.
Keep in mind the Tesla Model X is actually two years late already thanks to persistent production woes before the Model X even started rolling off the line. Yes, TSLA is finally delivering the all-electric SUVs at long last — after taking deposits on the vehicle way back in 2012. That’s a hell of a long time to wait!
As a cutting Bloomberg article put it, “Musk is known for making the future come early. But somehow he’s always behind schedule.”
TSLA Stock and Production vs. Tesla Vehicles Themselves
TSLA stock cut its full-year production target this summer in part because of complications accommodating Model X production. But then, what’s in store when the line goes from two cars to three with the launch of the Model III compact car? We’re supposed to get a glimpse at the vehicle next year with production in 2017 … but investors shouldn’t hold their breaths.
Musk cited supply chain issues, and theoretically the so-called gigafactory in Nevada will take the pressure off in regards to one of these challenges by producing plenty of next-generation batteries. But we’ve already seen plenty of rumors about delays in construction of this project, and given the recent history of setbacks, it’s not foolish to take some of these reports seriously.
Look, I’m not trying to pooh-pooh what TSLA stock has delivered shareholders so far. A 10% gain on the year in a down market is nothing to sneeze at, and Tesla’s roughly 1,100% returns since its 2010 IPO have made plenty of people quite rich.
I’m also not trying to badmouth the vehicles, which still amaze me when I see them up close and which continually amaze the critics.
But the wonder of Tesla may be its downfall, since the complexity and high quality of these vehicles naturally limits how fast they can be produced. There is still pent-up demand, but as the Model X shows, it’s impossible to sate that demand in the short term — and perhaps even in the medium term.
After all, a TSLA car fanatic will wait a couple years for an SUV … but a TSLA stock investor isn’t as willing to sit idly by for eventual deliveries.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP.
