Tesla Has a Forecasting Problem
Inability to predict near-term Model 3 production should give investors pause about Elon Musk’s vision
The mass-market car of the future is taking its sweet time to arrive.
Tesla TSLA -1.43% announced Monday that it delivered 220 Model 3 sedans in the third quarter and produced just 260. The company had predicted it would produce 1,500 in the quarter. Tesla attributed the shortfall to various “production bottlenecks.”
That news overshadowed an otherwise strong delivery report and shares fell only slightly Tuesday morning.
It is unlikely that this stumble will immediately reverse much of the 55% gains Tesla shareholders had reaped so far this year. After all, the company said in a statement that there are no fundamental issues with the supply chain. No American company enjoys a more loyal shareholder base than Tesla and this moment is unlikely to be different.
Still, Tesla’s persistent inability to forecast its results should raise concerns. Tesla issued the forecast of 1,500 cars just two months ago and missed it by over 80%. Monday’s announcement marked the third time since January that Tesla has cited production issues as a reason for a missed forecast, yet Tesla is no startup—the company has been in business since 2003.
Given those stumbles, the longer-term forecasts that have investors so excited deserve some scrutiny. Analysts expect Tesla to deliver 748,000 cars by 2020, according to FactSet. That is up from a forecast of 114,000 this year.
To reach that goal, Tesla will have to consistently deliver reliable cars while selling them at a profit, something the company has never been able to accomplish. It will also have to fend off new competition from better-capitalized rivals showing renewed interest in developing electric cars of their own.
Long-term shareholders have been richly rewarded for their faith. Exiting before the story sours would be a wise decision.