Silent and Effective from Tesla Motors Production Numbers Are Anything But Grim, But They Are Worth Looking At

Tesla has a bit of a problem with their numbers, and that is not just in the stock price. They are hoping to produce 400,000 Model 3’s a year to match pre-order numbers already in place globally. But, is this number possible?

Tesla’s Freemont, California plant has made up to 500,000 vehicles in a year. The number may seem encouraging, but there is an obvious problem. The 500,000 number reached is for traditional combustion-engines, which have about a decade of production experience worked out for efficiency. It is also a number not met every year, but more of a “it is possible and has happened” type of production number.

This will force Tesla to emphasize production, and the problems continue. The production for the Model 3 has underperformed critically in 2015. Underperformance was also the result in 2016, which may have directly resulted in the share price drop after the quarterly announcement. The missed marks in production will mean major upfront losses to shareholders. Interestingly, the company did not lose any money directly. It is more about the perception, which is a far more temporary issue that is unlikely to snowball for Tesla.

Perhaps a bigger problem is the profit margins. Tesla is not being extremely transparent about the profitability of the Model 3. This shroud of mystery is concerning, but it does make sense. Tesla has proven it can sell a car (hundreds of thousands, in fact). Conceptually, silent and effective fromTesla motors is recalling the Amazon strategy. Can they promise clear profit margins? No, but they have the authority and track record to prove that their products sell. As long as this continues to be the case, profit will undoubtedly be produced.

It isn’t the clearest strategy. Tesla has proven they have the ability to make it happen. The company is undergoing a massive shift in resources and goals. This may be the opportune time for them to switch from a well-developed niche to an obvious mainstream presence in the Model 3. Investors are overwhelming unconcerned. They know that any major transition in a company is met with a change in stock ownership. It seems to be the inevitable result of shifted resources.