Anyone that has followed Elon Musk and Tesla (TSLA) in recent years knows that delays come quite often. After telling the public that the company would unveil its semi-truck in September, the event was pushed back to October and then again to November 16th. We are finally just a few days away from the reveal, which right now is likely just a timely distraction from the rest of the company’s problems.
(Source: Most recent semi-truck rumors)
It’s clear right now that the company’s supporters are doing whatever they can to shift focus away from the Model 3 delay. From articles telling you the company, which derives almost all of its revenue from vehicle sales, is a software firm with billions in potential gross profits from a Tesla Network that doesn’t exist yet (and was supposed to be discussed more this year) to analysts saying that Tesla is to EVs what Apple (AAPL) was to smartphones, well, except for the cash flow and profits – there is clearly an effort to shift the current narrative.
You know things are out of touch with reality when analysts start throwing out guesses that make absolutely no sense. On the same day that Electrek reported Tesla built 180 Model 3 units in October, likely ending the month at a build rate of a few dozens per week, RBC’s Joseph Spak guessed that the current rate was 700 per week and going to 1,200 to 2,000 per week by year’s end. I’m very curious to know how he sees the company going from a few dozen to 700 per week in less than 10 days, yet not getting to more than 2,000 with an additional 50 days. I’m not sure if that represents an exponential, stepped exponential, or some other non-linear increase pattern, but it doesn’t seem to make sense. It reminds me of December 2015 when another Tesla analyst said the company would be producing 800 Model X units per week by the end of that month and it took Tesla several more quarters to get to that rate.
There are many questions left for Tesla to answer this week in regards to the semi-truck. The most recent rumors suggest it will have a range of 200-300 miles, but what battery size will that be, and how much will it cost? At that range, it’s likely only suited for short or medium term hauling. At the recent Tokyo Motor Show, Daimler (OTCPK:DMLRY) unveiled its own electric transport truck with an estimated 220 miles of range, beating Tesla to the punch. Elon Musk thinks that Tesla will be able to scale production of the truck in 18 to 24 months, but his timelines are always questionable. If the company can’t get the Model 3 to consumers 18 months after its reveal, how in the world is Tesla going to get a newer, larger, and more complex product done in a similar time frame? We don’t even know how Tesla plans on making this semi-truck, given its Fremont plant seems to be bursting at the seams already. Will there be a surprise about production of the semi at either gigafactory 1 in Nevada or 2 in Buffalo?
I’ve also questioned whether Tesla may consider using this week’s semi-truck reveal as a means to raise additional capital in the short term. While management plans on the Model 3 bringing in tremendous amounts of cash starting in the next few months, we’ve heard several times before that capital raises were not needed. With Tesla shares well off their 52-week highs, the most recent junk offering doing quite poorly as seen in the chart below, and interest rates starting to rise ahead of the expected December rate hike, now would seem like a good time to get a cash cushion just in case Model 3 plans don’t come to fruition as soon as currently expected.
(Source: Finra page for Tesla’s 5.3% coupon bonds)
One thing I should note about the timing of Tesla’s event. Doors open at 7 PM Pacific time, so like many of the company’s past events, they will be after extended-hours trading closes. At the moment, Musk’s other company SpaceX currently has a scheduled launch in Florida for 8-10 PM Eastern the night before, and there is some question of that event due to weather concerns. With the normal next opportunity launch window being 24 hours later, don’t be surprised if the semi-truck event starts a little late if there is a SpaceX launch that same night. This is what happens when you have a part-time CEO.
Finally, what is the “big additional surprise” that Musk has teased will come alongside the reveal of the semi-truck? Will Tesla provide just a teaser image of the Model Y crossover that’s expected in the next couple of years, and maybe the company starts taking deposits on the Y and semi to alleviate cash flow concerns? Are we going to hear more about the “Tesla Network,” details of which were supposed to be coming this year, and we still have not gotten anything concrete? Whatever the surprise is, there are some out there more excited for this other item than the semi-truck itself.
In the end, this week’s semi-truck event for Tesla is likely nothing more than a distraction in the near term from the Model 3 problems. With so many questions left to be answered, it is unlikely that the semi will provide any material contribution to Tesla anytime soon. With a lot of negativity surrounding Tesla at the moment, the launch of another product can’t really happen until Model 3’s problems are fixed. That process took a hit late last week when a key company analyst found the fit and finish of the vehicle quite poor, and this was supposed to be one of the company’s better production models.
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