Tesla Slump Reflects Growing Skepticism of Company Vision
Tesla CEO Elon Musk said 2019 would bring an affordable electric car built in a new factory in China. But as WSJ's Tim Higgins reports, investors may be losing confidence in that plan. Photo illustration: Laura Kammermann
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- Thank you for supporting Tesla through this difficult period. Thank you. (audience applauding) - Elon Musk, the CEO, thought that 2019 was going to be a banner year for the company on the back of the Model Three. This compact car that's supposed to remake Tesla as a more mainstream auto maker with this vision of bring electrification, the electric vehicle to the masses. But then we get into the first quarter and things really didn't play out the way that everybody thought. As sales of Tesla vehicles plummeted compared to the fourth quarter. And then we saw really a push by Tesla to lower the prices of its vehicles in a really dramatic way on multiple occasions which raised the question, is there demand for the Model Three at the previous expectations. Has Tesla reached the ceiling of people willing to spend a lot of money for a small car? And that's the question that's really hanging over Tesla as we look ahead to this year. How does Tesla keep the growth story going forward? We've seen Tesla's shares drop below the $200 mark. Really underscoring the uncertainty in the investor's mind about where this company is going. (audience applauding) The company is rushing to build a factory in China, it broke ground just at the beginning of this year and hopes to have it done by the end of the year and to start up production. And that's a huge lift, that is something that would be remarkable if they pulled it off. But just beyond that, the issue for Tesla is that the US finds itself in a difficult position with China with the growing trade tensions. If you look at Tesla's results for the past year or so, China being it's second largest market behind the US, this is where a lot of the growth has been coming. The challenge is, is that because Tesla makes its vehicles in California and ships them to China, those vehicles are more expensive because of tariffs and the Model Three is aimed at a more mainstream buyer. They believed they need a factory on the ground to make those vehicles for the customers that they want to sell them to. Meanwhile there's a lot of headwinds coming just at the China market. Sales are down in that country overall and increasingly we're seeing huge investments by Chinese players to create their own electric car companies. The Tesla's of China if you will. The question will be, can Tesla operate in China, can it get its factory running? And then what kind of competition is it going to face? - The total number or orders for the Model Three in the past 24 hours has now past 115,000. (audience cheering) - The company has said they expect to deliver between 360,000 and 400,000 vehicles this year likely meaning that they will build many more. Some analysts question that, if there's really that demand. They also wonder if Tesla really has the capability to do that given that they've never been able to do that before. - We have to basically allocate all resources to Model Three production because otherwise we're gonna die, and. - It has come close to the end many times and yet Elon Musk has been able to figure out how to pull it out oftentimes at the last minute. And that's part of the charm of the company, but it's also part of the reason why you see a growing chorus of people who are betting against the company because they question whether the company can continue to have those close calls.