Since Tesla had its iPhone moment on March 31, reaching a total of 232,000 reservations in just 2 days for its Model 3, Bloomberg has compared it to the Citroen DS that, back at its launch in 1955, signed 80,000 unit sales. The Citroen DS was also marketed as a cutting-edge engineering marvel, that was incomparable with competitors on the market. However, the Tesla Model 3 broke barriers as one of the fastest accelerators in its category and the cheapest battery range available. The company has even developed HEPA technology that removes 99.97% of the harmful contaminants in the air with a ‘Bioweapon Defense Mode’ that eats up the smoke, pollution, allergens and bacteria in the air. However, this week the company received a disappointing fifth resignation from a key position in the company, its global head of production.
Just when the head-turning car manufacturer is accelerating operations to mass-produce the Model 3, Greg Reichow, Vice President of Production as well as Josh Ensign, Vice President of Manufacturinghave announced their departures from Tesla. These subtractions from the team are allegedly results of the delays and glitches experienced recently within the company, and a recall of Tesla’s Model X SUV. However, their spokesperson stated that, “after being at Tesla for over five years and leading its production team for the past three years, Greg Reichow has announced his intention to take a leave of absence from Tesla so that he can have a well-earned break.” Understandable, for many of us, but this raises concerns about the stability of the OEM’s internal operations, and whether we will see yet another delay in the release of its Model 3, promised for 2017.
The list of senior executives that have parted ways with Tesla this year is topped by Michael Zanoni, the Vice President of Finance and also the company’s Worldwide Controller, followed by James Chen, VP of Regulatory Affairs, and Ricardo Reyes, the VP of Global Communications. Only one of the 40 executives hired in the part year has left Tesla, in all fairness, but we wonder whether the departees left because of stressful working conditions, or simply earning so much they can afford to give up important positions and take sabbaticals. The latter is unlikely in what is still technically a start-up company.
Tesla’s history of delays for a minimum of 6 months may be concerning for those that have already placed their US$1,000 deposit on their Model 3 order. While we doubt these buyers are anxiously waiting to replace their current vehicle, on its last legs and scheduled to be cubed in exactly Autumn of 2017, it will be disappointing if the 3’s release is delayed by a year and a half, á la Model X.
In hard figures, Tesla’s shares were down 3%. Nonetheless, the electric car maker met Wall Street’s quarterly estimates and reported a 500,000 unit build target increase because of Model 3 demand. It claims to be on time for the Model 3’s production. The last time an executive resigned, namely Veronica Wu, in their China division, poor performance was reported, however, this quarter’s report is encouraging. Yesterday, Tesla did not post the expected loss of 58 cents per share on $1.6 billion in revenue, predicted by Thomson Reuters. In fact the company’s shares rose 8% before retreating slightly.
Reviews have been positive of the cars released, it seems the delays were worthwhile as they ensured the cars were released without bugs, and customers have been pleased. Furthermore, Elon Musk has announced his prediction of 100,000 to 200,000 Model 3 vehicles to be produced before summer 2017. Which is just as well, as Tesla can no longer afford delays, especially following doubts sparked by the CFO possibly cashing in his chips while at the top. Firstly, Tesla used to rely on rich early adopters who were in no rush to acquire the latest gadget, but many of those that took a gamble on reserving a Model 3 are not as flush and cannot afford the wait. Secondly, the huge backlog of reservations will almost certainly increase from 400,000 before the car is officially released. It is important to remember that the competition (General Motor’s Chevy Bolt) is hot on their heels, and will allegedly cost less that US$40,000. Most importantly however, the US subsidy on electric vehicles will expire, and that US$7,5000 discount will have to be absorbed by buyers if Tesla doesn’t hit deadline.
The pressure is on, and the team has some major holes opening up at the top of Tesla. We hope the recent resignations are not foreboding further delays for Tesla, as the electric car market needs to seriously accelerate worldwide, so anyone that thinks they’re up to the job of spearheading a start-up production line for the next iPhone-style obsession, has our support and admiration. Analyses from Tesla’s side tend to be positive, and perhaps this will filter through to make this difficult situation an area of opportunity.
Data sources: Bloomberg, Thomson Reuters, CNBC, Tesla Motors.