The Tesla Inc. (NASDAQ:TSLA) bulls are getting restless. Over the last year, Ford Motor Co. (NYSE:F) has done better for investors than TSLA stock. The market cap of Ford is now within $3 billion of Elon Musk’s electric miracle car company, and General Motors Corp. (NYSE:GM) is now $5 billion ahead.
Tesla is due to report earnings May 2, with analysts expecting a loss of $4.45 per share on revenues of $3.14 billion. That would be less business than was done during the December quarter, and losses have been growing worse for a year, with the company unable to hit even these low targets.
Bears have their claws out. They call this the end game. They call CEO Elon Musk distracted. Some want him gone.
For those who rode the stock to the skies, it’s all very humbling. But is it time to bail on TSLA stock?
Tearing Down Tesla
The biggest news hitting the company may be a teardown of the Model 3 done by Munro and Associates, an Auburn Hills, Michigan design consultant.
They like the engineering and design but conclude that the manufacturing is shoddy. The Fit, Finish & Quality is inferior for the price point, Munro concluded.
Scaling manufacturing has always been the company’s Achilles Heel. I wrote about it almost two years ago, a “boring story that should not be ignored.” If Tesla can’t scale production while maintaining quality, I wrote, nothing else will matter.
Elon Musk has tried sleeping at the factory, he has tried changing-out managers, and he has tried replacing robots with people. He used production engineer Sheena Patterson to brag about how things are improving. But this is where the 100-year head start of Tesla’s conventional rivals matters.
Tesla is becoming a dangerous place to work.
Autopilot Problems
Then there’s the autopilot. It’s not something I’ve focused on, because a sports car is meant to be driven, not to drive itself. But it’s becoming apparent that Tesla is now falling behind in this area too.
Tesla is now replacing its third Autopilot designer in 18 months, Jim Keller having been poached by Intel Corp. (NASDAQ:INTC).
This is a month after Apple Inc. (NASDAQ:AAPL) engineer Walter Huang died after complaining repeatedly about the company’s autopilot system.
The problem is that rivals are not standing still waiting for Tesla to scale. They know scaling, and they’re now focusing all their energy on electric technology and autopilots.
The Bottom Line on TSLA Stock
Tesla has succeeded in scaling production of batteries and solar panels. The batteries are lasting longer than expected, and solar tiles are going onto roofs in California.
That last is important, because tiles should not only cost less to install than panels but should not require the extensive permitting process that has slowed solar on residential rooftops. All they need is a waterproof backing and a wooden frame. They go on like a roof, not a solar installation.
But as the TSLA stock’s fourth quarter report makes clear, energy generation and storage is just one-tenth of revenues.
At some point Tesla must become a real car company, judged not by its potential or its growth, but by its size and its profit. Investors are still paying four times sales for the TSLA stock, while GM sells for a little more than one-third of its sales. Selling the company is not an option. The price being paid on the public market isn’t available from another carmaker.
U.S. driveways are sprouting Nissan Leafs, Chevrolet Bolts and Toyota Priuses in abundance. Tesla’s success depends on its making its cars just as common, and that right soon.
Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in F.
