Elon Musk is sleeping on Tesla's factory floor to oversee its Model 3

Elon Musk. Reuters

Elon Musk. Reuters

Published Apr 4, 2018

Share

Billionaire Elon Musk has said he sleeping on Tesla's factory floor amid 'production hell' of the firm's highly-anticipated Model 3 electric car.

Production of the £25,000 ($35,000) vehicle, hailed as Tesla's first lower-cost, high-volume car, has been marred by delays as the firm has struggled to keep up with pre-order demands.

In a tweet, CEO Musk said he is now sleeping at the company's factory, adding that the car business 'is hell'.

Musk was hitting at a recent report fromThe Information that alleged Tesla's struggles to keep up with Model 3 demands had driven the billionaire to take direct control of the division in charge of producing the vehicles.

In his tweet, Musk claimed he had not wrestled oversight of Model 3 production from Tesla Vice President of Engineering Doug Field, adding that changes to the company's hierarchy were an attempt to 'divide and conquer'. 

Musk wrote: 'My job as CEO is to focus on what’s most critical, which is currently Model 3 production.

'Doug, who I regard as one of the world’s most talented engineering execs, is focused on vehicle engineering.

'About a year ago, I asked Doug to manage both engineering & production. He agreed that Tesla needed eng & prod better aligned, so we don’t design cars that are crazy hard to build.

'Right now, tho, better to divide & conquer, so I’m back to sleeping at factory. Car biz is hell …'.

The tweet comes after a string of setbacks to production of Tesla's Model 3, which the company released in July 2017 with a batch of 30 vehicles sold exclusively to members of staff.

The £25,000 ($35,000) five-seat vehicle travels 215 miles (346km) on a single charge and accelerates from zero to 60mph (0-100kmh) in under six seconds.

Although the eco-friendly car is one of Tesla's more affordable models, those looking to buy the vehicle may be waiting months before they can get behind the wheel.

Tesla had struggled to meet the impressive demand for its vehicle, with a reported 500,000 pre-orders put in so far.

Tesla shares plunged 5 percent on Monday as investors awaited production numbers for the closely watched Model 3, a cheaper vehicle that analysts see as crucial to the luxury electric automaker's long-term profitability.

A deadly crash last month involving Tesla's autopilot technology and concerns about the company's ability to raise new capital also took a toll on stocks. 

Tesla, founded by billionaire Elon Musk, declined to comment on production numbers for the Model 3, which are expected to be released this week. 

The stock briefly pared losses after auto industry blogs - citing an unverified memo - reported that production of the Model 3 passed the 2,000 per week production rate. 

That would be short of Tesla's own target of 2,500 per week for the end of March but far above the 793 Model 3s built in the final week of last year.

Musk himself is focusing time on Model 3 production because it is the 'highest priority,' a Tesla spokesman said on Monday, saying that engineering chief Doug Field was focused on vehicle engineering.

Some buy-side Tesla watchers questioned whether the company could sustain such numbers - if they prove to be true - and also worried about profitability.

'There's been a number of things combined to impact the stock,' said Tony Boase, senior research analyst with Nuveen Asset Management in Minneapolis. 

In addition to the Model 3 production rate, he cited a recent Moody's downgrade of Tesla's credit rating and the crash of a Tesla Model X and the company's comments since the crash.

'It comes down to the Model 3. That's the key,' Boase said. 'If they can profitably build those cars that would be a huge step in the right direction.

'If you couldn't do (2,000) without using all the resources and at a decent margin level, what have you really achieved?' he added.

Another investor who said he has profitably sold Tesla shares short four times in the last 18 months was also skeptical.

'Are they really at 2,000 or did they just stuff their system to achieve 2,000 for last week?' said David Kudla, chief executive and chief investment strategist at Mainstay Capital Management, who said he currently has no bets on Tesla.

'The only position I'd have on it is short because they aren't making any money. Their operating losses are growing. The stock's been overvalued for months,' he said.

Tesla said on Friday that the Model X involved in a fatal crash in California last week had activated its Autopilot system, raising new questions about the semi-autonomous system that handles some driving tasks.

Tesla's shares closed down $13.65 at $252.48 on Monday, after earlier hitting their lowest level in just over a year.

So far in 2018, the shares are down 19 percent, at a time when technology shares have suffered particularly as stock prices fall across the board.

Tesla has said it had about 500,000 advance reservations from customers for the Model 3, but manufacturing bottlenecks since last July have delayed production and deliveries to customers, exacerbating the company's need for cash.

Failure to meet targets and pressures on funding prompted Moody's downgrade last week, saying that Tesla was likely to raise more than $2 billion in new capital, partly to cover about $1.2 billion in convertible bonds due by March 2019.

Tesla still has loyal investors, including Zevenbergen Capital Investments in Seattle, which has owned the stock since the company's initial public offering.

'Historically, volatility has provided good entry points. Looking at it today we believe the demand outlook remains robust and unchanged,' said Joseph Dennison, portfolio manager at Zevenbergen. 

'I still believe their product targets and outlook they've given in the past. While they've been optimistic on the timing they've always followed through.'

-DAILY MAIL

Related Topics: