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Musk's U-Turn: Back In Production Hell And Sleeping On Factory Floor

Apr. 03, 2018 4:08 PM ETTesla, Inc. (TSLA)VWAGY115 Comments
Anton Wahlman profile picture
Anton Wahlman


  • Elon sends out bullish email to employees talking about Model 3 production hitting 2,000 per week and sounding very bullish about Model 3 production.
  • Hours later, the VP of Engineering is out of supervising production, and Musk installs himself as production boss.
  • Minutes thereafter, Musk engages the reporter who broke the production management reorganization story on Twitter and says the most surprising thing.
  • That thing is that only 11 hours after the morning’s bullish Model 3 production email, he's back in “hell” and sleeping at the factory.
  • This is a total U-turn. First, Model 3 production is finally fine.  Then, the guy who oversees the production is out, and production is back in “hell” and sleeping on floor.  Which is it?

Phew, that didn't take long! What am I talking about? In internal emails and Elon's tweets, a major contradiction surfaced around the time the market closed on Monday, and it's one with severe investment implications for investors.

But first, let's backtrack to last Thursday, just before the long weekend started, in order to set the stage for what transpired on Monday. Mind you, this was only four days prior.

On Thursday, Doug Field, who is VP of Engineering but for some reason also was overseeing and/or working with the VP of Production Peter Hochholdinger, sent out an internal email in which he announced actions that would allow the company to hit its goal of producing 2,500 Model 3 units per week, before the end of the March quarter: Tesla pushing hard to hit Model 3 target.

Resources were taken from Model S and X production in order for the Model 3 to get closer to meeting the 2,500 per week goal. Seeing as Tesla makes frequent use of the word "extrapolation" we also can use it for the Model S and X: Extrapolating this action of taking people away from their assembly line, the Model S and X will be zero going forward. And those are the only Tesla cars with positive gross margin. So that's the other side of the Model 3 resource equation.

Based on this, you saw the stock make a major recovery on Thursday, from being down to closing up 3.3%. Then, over the weekend, the 123,000 car recall (Tesla recalls 123K Model S cars over potential power steering failure) and an admission that the fatal Model X accident on March 23 had involved Autopilot: Tesla acknowledges use of Autopilot ahead of fatal crash.

Regarding that March 23 Tesla Autopilot accident, let me digress for a moment. One

This article was written by

Anton Wahlman profile picture
I am a former sell-side analyst -- UBS 1996-2002, Needham 2002-2006 and ThinkEquity 2006-2008. These days I review automobiles and other technology products, as well as analyze the automotive and technology industries, and coming up with long/short ideas. I also continue to write (less frequently) on macroeconomics and politics.

Analyst’s Disclosure: I am/we are short TSLA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

At the time of submitting this article for publication, the author was short TSLA. However, positions can change at any time. The author regularly attends press conferences, new vehicle launches and equivalent, hosted by most major automakers.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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