Will Tesla Still Be Around In 5 Years?

In February Elon Musk launched a Tesla electric sports car into space on the powerful new Falcon Heavy rocket, and Tesla also reported its fourth quarter earnings, which narrowly beat analyst estimates. The company's revenue rose to $3.288 billion, from $2.284 billion a year ago. Both of these events demonstrate Tesla's potential and sheer audacity. Yet, these headline grabbing events don't change the fact that the company is hemorrhaging red ink, losing $1.9 billion for full year 2017, and those loses will increase even further in 2018. Additionally, during their earnings conference call, company officials tried to tamp down expectations for 2018, citing battery supply constraints and production delays at their new state-of-the-art Gigafactory. The Tesla Gigafactory, still partially under construction, is located near the unincorporated community of Clark, Nevada, in northern Storey County, about 17 miles east of Reno. Construction on the facility is expected to be completed by 2020

According to David Trainer the CEO of New Constructs, an equity research firm, Tesla has been plagued by production problems from the very beginning, from its first car, the Roadster to the current Model 3. The Roadster actually used an AC motor originally designed in 1882 by Nikola Tesla himself. Additionally, Trainer wrote in a recent article that the Model 3 production problems also led to the delay of the debut of Tesla's first commercial vehicle, the new electric semi-truck. Further, Trainer points out that while Tesla promises the moon and even Mars, the company continues to struggle with basic manufacturing and production. Tesla's main vehicle manufacturing facility is in Fremont, California. Moreover, Tesla's troublesome production delays aren't occurring in a vacuum. There is increasing competition in the electric vehicles (EV) arena. The Chevy Bolt outsold all Tesla models combined last October, and Chevy delivered over 23,000 Bolts in 2017. Tesla clearly needs to fix its production issues, or some on its long waiting list of EV customers may abandon it for more easily accessible options. Tesla quickly racked up 373,000 pre-orders for the Model 3, charging $1,000 just to get on the waiting list.

Tesla is clearly on the cutting edge of coming changes in the auto industry. But that wave of change only looks like a little ripple now. Being the first mover in an industry is no guarantee of eventual profitability, or even of survival as a going concern. Tesla is one of the most ambitious and dynamic companies to come along in the past decade. The question is will Tesla run out of borrowed money before it gets a chance to actually ride that wave of change? Only time will tell.