Tesla Inc (NASDAQ:TSLA) Keeps Burning Investors’ Cash as Model 3 Delays

November 07, 2017, 11:13 am ET, BY Simon M.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

Tesla Inc (NASDAQ:TSLA) recently reported its third quarter results, which disappointed both investors and analysts as the company reported a net loss, while management failed to elaborate on when the company expects to become profitable. A crucial note in its Q3 report and its recent 10-Q filing is the fact that the company expects to reach its production target of 5,000 model 3 cars a week by end of Q1 2018.

Article Summary

Tesla reported a net loss in Q3 2017 and is likely to need more capital.

The company is pushing mass production of the Model 3 into Q1 2018.

There is a risk that other carmakers might take up Tesla’s market share due to the delays.

Here’s the trading report on TSLA.

The company is a perennial money-loser that has never had a profitable quarter despite launching several electric vehicle models and being a leader in the EV market. However, Tesla might be running out of time in its efforts to make a profit given that other automakers such as General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F) have started manufacturing EVs.

General Motors launched the Chevy Bolt EV, which competes with Tesla’s Model 3, and it reported more sales that Tesla’s Models and X in October this year. This means that other vehicle manufacturers have started taking some of Tesla’s market share, which means that the production issues that Tesla is facing could impact the company’s future profitability over the long-term.

Ford Motor Company is also in the process of designing an electric version of its popular F-150 truck, which could also impact Tesla’s market share in this very lucrative market. Although the company said that it would not need to raise capital in future after it raised $1.8 billion in August, this is likely to change in the near future.

The fact that Tesla is postponing the production ramp of the Model 3 production to 2018 clearly indicates that the company will need more capital in order to sustain current production. The company had a target of producing 500,000 cars in 2018 based on a weekly production of 10,000 Model 3 cars as well as Model S and X versions.

Tesla shareholders will have to wait much longer for the company to become profitable due to the production delays. However, there is an inherent risk that the company might not be profitable in the near future given that it does not report any deferred taxable assets in its financial reports.

There is also a significant risk that other EV makers might have saturated the available EV market given that they have more experience producing cars on a much larger scale than Tesla’s.

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