Teslas Invisible Cars

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What's going on?

Everyones favorite over-optimistic electric car maker Tesla said on Thursday that production of the all-important Model 3 sedan its new affordable vehicle is still short of its expectations, but investors didnt seem too fazed.

What does this mean?

Tesla has amassed over half a million pre-orders, but its proven much slower at fulfilling them than originally promised. On Thursday, Tesla said it would likely build about 2,500 Model 3s per week by the end of the first quarter, rising to 5,000 by the end of the second quarter (a run rate it initially planned to be at now). Tesla has produced roughly the same total number of vehicles in each of the past six quarters which doesnt gel with its reputation (and valuation) as a growth company.

Why should I care?

For markets: Tesla may have to again tap shareholders for cash.

Teslas production costs are currently higher than its sales income; it will consequently burn through more cash than anticipated so long as production numbers remain relatively low. This means that Tesla may soon have to sell new shares in itself in order to raise more cash (and such an action would cause its current shareholders to own less of the company). Nevertheless, investors appeared unperturbed Teslas share price barely fell on Thursday, perhaps because theyd already anticipated these production issues. The faithful are likely to be less forgiving if Tesla doesnt hit its new, more beatable target. (tweet this)


The bigger picture: Huge demand is expected for the electric car but there are a bunch of competitors hoping to capitalize on it.

Part of Teslas appeal for investors stems from the seemingly safe bet that theres big demand for electric vehicles and that Tesla, a brand synonymous with the electric car, is in pole position to capitalize on this. However, virtually every major automaker is now feverishly working to vie with Tesla for consumers wallets potentially limiting Teslas first-mover advantage.

Originally posted as part of the Finimize daily email.

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