Tesla's Growing Failure List (August 2019 Update)

Jun. 12, 2017 11:28 AM ETTesla, Inc. (TSLA)57 Comments
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I am a market enthusiast and part-time trader. I started writing for Seeking Alpha in 2011, and it has been a tremendous opportunity and learning experience. I have been interested in the markets since elementary school, and hope to pursue a career in the investment management industry. I have been active in the markets for several years, and am primarily focused on long/short equities. I hold a Bachelor of Science Degree from Lehigh University, where I double majored in Finance and Accounting, with a minor in History. My major track focused on Investments and Financial Analysis. While at Lehigh, I was the Head Portfolio Manager of the Investment Management Group, a student group that manages three portfolios, one long/short and two long only. I have had two internships, one a summer internship at a large bank, and another helping to manage the Lehigh University Endowment for nearly a year.


Disclaimer: Bill reminds investors to always do their own due diligence on any investment, and to consult their own financial adviser or representative when necessary. Any material provided is intended as general information only, and should not be considered or relied upon as a formal investment recommendation.

A collection of Tesla (TSLA) statements and quotes that have not come true basically since the start of the Model S program.

From quarterly investor letters:

2011 Q3 letter:

1. "Since we are leveraging the Model S architecture and powertrain for Model X, we continue to anticipate that Model X can be brought to production quickly for first customer deliveries in late 2013, with volumes ramping to 10,000 - 15,000 units per year beginning in 2014"

2011 Q4 letter (includes full year guidance):

2. Deliver 5,000 Model S in 2012 (actual 2,650)

3. Revenues of $550-$600 million in 2012 (actual $413 million)

4. Q1 gross margin in high 30% range (actual 34%)

5. Q2 gross margin of around 30% (actual 18%)

6. Q3 gross margin to be positive (actual negative 17%)

7. Q4 gross margin tracking towards 25% target (actual 8%)

8. Stock-based compensation of $40-$45 million (actual $50.15m)

2012 Q1 letter:

9. Yearly revenue guidance raised to $560-$600m (see above)

10. Q2 revenues comparable to Q1 level (Q1 was $30.2m, Q2 was $26.7m)

11. Gross margin guidance trends reiterated (see above)

2012 Q2 letter:

12. Yearly revenue guidance maintained (see above)

13. Model S delivery forecast reiterated (see above)

14. 500 deliveries in Q3 (actual "above 250")

15. R&D spending will be flat in Q4 (actually rose 11.2%)

2012 Q3 letter:

16. Q4 deliveries of 2,500 to 3,000 (actual about 2,400)

2012 Q4 letter (includes full-year guidance):

17: "Longer term, regulatory credit revenue should decline relative to our automotive sales as we grow our sales outside the United States and earn fewer credits on the smaller battery packs. While we will pursue opportunities to monetize the credits we earn from the sales of our vehicles, we do not need to rely on such sales to be a significant contributor to gross margin, and our business model is not predicated on such credits." Without sales of credits, Tesla would have lost hundreds of millions more and burned through even more cash, necessitating additional capital raises.

2013 Q1 letter:

18. Expect to be roughly breakeven in operating cash flow in Q2 (actual was negative $38.2 million)

2013 Q3 letter:

19. Expect SG&A expenses to rise sequentially by about 20% in Q4 (actual was 31.7%)

2013 Q4 letter (includes full year guidance):

20. Expect to deliver 35,000 vehicles in 2014 (actual under 32,000)

21. Expect gross margins to hit 28% in Q4 (actual 26.7% non-GAAP and 27.4% GAAP, but 22.0 when excluding ZEV credits)

22. Operating expenses in Q1 to grow 15% (actual 17.2%)

23. "With this facility (The "gigafactory"), we feel highly confident of being able to create a compelling and affordable electric car in approximately three years." 4.5 years later, the affordable vehicle still did not exist.

2014 Q1 letter:

24. Expect to be slightly free cash flow negative for year before considering equity required for leasing (yearly free cash flow was negative $1.03 billion)

25. Expect to lease about 200 vehicles in Q2 (only leased 158)

2014 Q2 letter:

26. Provided that we execute well and there are no serious macroeconomic shocks, Tesla’s annualized delivery rate should exceed 100,000 units by the end of next year. (Quarterly deliveries in Q4 2015 were less than 17,500)

27. China has almost 10 times as many cities with more than 1 million people compared to the United States, so we believe the opportunity is substantial. (4 years later, deliveries to Asia remain a fraction of US deliveries)

28. R&D expenses to grow about 20% sequentially (actually 26.1%)

2014 Q3 letter:

29. "Investing to increase production to 2,000 vehicles a week by end of 2015." (Only produced 14,000 in Q4 2015)

30. Expect to deliver 33,000 vehicles in 2014 (see above)

31. Expect to earn $0.30 to $0.35 per share, non-GAAP (actual was a $0.13 per share loss)

32. ZEV credit revenue expected to be quite minimal (actual was $66 million, nearly 7% of total GAAP revenue for quarter)

33. Q4 non-GAAP operating expenses are expected to grow sequentially by just under 10% for R&D and SG&A as we wind down Dual Motor development. (Actually rose by 15.5%)

2014 Q4 letter (includes full-year guidance):

34: Expect 55,000 S and X deliveries in 2015 (actual just over 50,000)

35: Target of 30% gross margin for Model S in Q4 (target eventually pushed back a year)

36. Expect operating expenses to grow 40%-50% (actual 53.5%)

37. Expect a significantly higher level of non-GAAP profitability (actually lost $2.30 per share)

2015 Q1 letter:

38: Expect Q2 non-GAAP automotive gross margin excluding SBC just under 25% (actual 23.9%)

39. Expect Q4 services and other gross margin to be slightly better than breakeven (actual was negative 2.1%)

40. We expect to sell about $15 million of our regulatory credits in Q2, including about $5 million of ZEV credit sales. (Actual was $27 million and $14 million, respectively)

2015 Q2 letter:

41: Production and demand of 1,600 to 1,800 units per week in 2016 (fell short on demand by quite a bit)

42. $30 million of ZEV credit sales in Q3 (actual was $39 million)

2015 Q3 letter:

43: Expect Q4 automotive gross margin, non-GAAP, to decline just slightly from Q3 (actually declined 280 basis points)

44: Expect Q4 services and other gross margin to remain positive (see above)

45: Operating expenses in Q4 should increase slightly (actually increased by $63.7 million or 15.4%)

46. Expect to produce 15,000 to 17,000 vehicles in Q4 (actual 14,037)

47. Do not expect to sell any ZEV credits in Q4 (actual $8 million)

2015 Q4 letter (includes full-year guidance):

48. Expect to generate positive net cash flow (actual was negative $1.4 billion)

49. Expect to achieve non-GAAP profitability for year (actual was a $2.87 per share loss)

50. Expect to fund capex without accessing any outside sources other than those that support leasing and financing activities (company raised $1.7 billion alone from stock sales)

51. Expect to open 80 retail locations and service centers (actual 55)

52. Expect to energize about 300 new supercharger locations (actual 208)

53. Plan to deliver 80,000 to 90,000 Model S and X (guidance later reduced for second time)

54. Expect to deliver 16,000 vehicles in Q1 (actual 14,820 at initial delivery announcement)

55. By year end, Model S gross margin to approach 30% and Model X to approach 25% (Actual automotive gross margin was 22.6% in Q4, 22.2% excluding SBC and ZEV)

56. Total operating expenses should increase by 20% (actual increase was 38.1%, despite above mentioned cutbacks to supercharger locations, retail/service locations)

Q1 2016 letter:

57. Expect Q2 deliveries to be 17,000 vehicles (actual was 14,402)

58. Expect to produce 20,000 vehicles in Q2 (actual was 18,345)

59. Maintain full year delivery guidance (see above)

60. Maintain gross margin guidance for end of year (see above)

61. Operating expenses to rise by 20%-25% for year (see above)

62. Expect capex to be 50% higher than previous $1.5 billion target (actual $1.28 billion)

Q2 2016 letter:

63. 50,000 deliveries for second half of year (actual 47,073)

64. Plan to exit Q3 at production of 2,200 per week (for S/X), increase to 2,400 per week in Q4 (did not reach either, still have not hit 2,400 a week even in Q2 2018 and using just 12 weeks in quarter)

65. Expect GAAP and non-GAAP automotive gross margins to increase by 2-3 percentage points through Q3/Q4 (actual was a decline of 0.5 points for GAAP, increase of 0.3 points for non-GAAP)

66. Operating expenses to rise about 30% (see above)

67. Reiterating capex guidance for $2.25 billion (see above)

Q3 2016 letter:

68. Q4 plan of just over 25,000 vehicles to meet second half target (actual was 22,252)

69. Reiterate gross margin guidance (see above)

70. Reiterate operating expense guidance (see above)

71. Reduce capex guidance to $1.8 billion (see above)

72. "With the previously announced plan to acquire SolarCity, we look forward to making solar as compelling as electric vehicles." (Less than two years later, solar deployments are plunging and massive reorganization was completed)

Q4 2016 letter:

73. GAAP gross margins should recover in Q1 2017 to Q3 2016 levels (actually declined by 200 basis points)

74. Non-GAAP automotive gross margins to expand further in Q2. (Actually declined by almost 300 basis points)

75. As this transition progresses, we see a return to growth of MW deployed later this year to help us generate the cash and realize the cost synergies we projected prior to the acquisition. As TeslaCharts has graphed here, MW deployed plunged in every quarter in 2017.

Q1 2017 letter:

76. Non-GAAP gross margins to be 250 basis point decline - (actual was 285 basis points)

Q2 2017 letter:

77. Consequently, we expect non-GAAP automotive gross margin to temporarily dip below 20% in Q3, before recovering in Q4 and beyond. (At Q3 2017 report, company now expects 15% margin in Q4).

78. For the second half of 2017, we expect strong improvement in operating leverage as revenue should significantly increase in the second half of the year as compared to the first half, while operating expenses should remain essentially flat. (In the second half, operating expenses were more than $188 million higher than the first half).

79. Company expects to hit production run rate of 5,000 units of Model 3 per week in late Q4 2017. (At Q3 2017 report, timeline pushed back by 3 months.)

80. Company states that standard battery Model 3, featuring a $35,000 starting price and 220 miles of range, should be available in November. As 2018 started, production will start sometime in "early 2018". Further pushed back after Q4 2017 earnings report. Still waiting as of December 2018.

81. Consequently, Model 3 is designed with greater simplicity and fewer components to reduce cost, improve ease of manufacturability and further enhance reliability. This significantly reduces manufacturing complexity and streamlines the purchasing process for our customers. Musk has admitted automation was a problem, and company has continually missed targets.

82. This year, we plan to add nearly 100 retail, delivery and service locations globally, representing an approximately 30% increase in facilities. Company ended year with 330, after finishing 2016 with 265.

83. We also continue to plan on increasing Model 3 production to 10,000 vehicles per week at some point in 2018. Target pushed back to 2019.

84. Model 3 non-GAAP gross margin to be positive in Q4 (did not turn positive until Q2 2018)

Q3 2017 letter:

85. Model 3 production to hit 5,000 per week by end of Q1 2018. When Q4 2017 deliveries and production announced, timeline pushed back 3 months.

86. Non-GAAP automotive gross margin to decline to about 15%. Actually declined to 13.8%.

87. Gross profit is expected to grow more than operating costs in Q4 compared to Q3. Gross profit actually declined, while operating costs rose by $52 million.

88. Operating costs are expected to be flat to up slightly in Q4. Up $52 million, or more than 5.3%.

89. We expect Service and Other revenue to increase further in Q4. Actually declined by more than $16.2 million, more than 5%.

90. Service and Other losses are expected to reduce substantially in each subsequent coming quarter as our fleet grows and service centers become more utilized. Service and Other gross loss increased to $89 million, a decline of roughly 1000 basis points.

91. Consequently, we expect Model S and Model X gross margin to improve in upcoming quarters. Model S and Model X gross margin in Q4 declined very slightly compared to Q3.

92. "Between cash on hand, future cash flows and available lines of credit, we believe that we are well capitalized to accommodate the revised ramp of Model 3 production to 5,000 per week." (Company raised nearly $550 million in Q1 2018 auto ABS deal)

Q4 2017 letter:

93. Continue to target weekly Model 3 production of 2,500 per week by end of Q1 2018. Company only got to 2,020 in one final burst production effort.

94. Service and Other gross margin should improve in each subsequent quarter in 2018. Actually worsened from -30.75% to -44.63%.

95. Also, we are focused on achieving our target of 25% gross margin for Model 3 after our production stabilizes at 5,000 cars per week. Company has backed out that for the "medium term", hopes to be around 20% by end of 2018.

Q1 2018 letter:

96. "We expect Service and Other losses to reduce substantially in the coming quarters." - Q2 loss was only about a 1% improvement.

97. "With increasing capacity for Powerwall and Powerpack products at Gigafactory 1, energy generation and storage revenues should continue to grow significantly throughout the year." - Sequentially, revenues were down by about $36 million, or around 9%.

98. "Losses attributable to non-controlling interest should remain in line with the last quarter." - Actually decreased by roughly $50 million, meaning net loss to common stockholders actually rose despite overall GAAP loss improvement.

Q2 2018 letter:

99. "Having achieved our 5,000 per week milestone, we will now continue to increase that further, with our aim being to produce 6,000 Model 3 vehicles per week by late August." - No indication rate was ever achieved, even as of November 2018.

100. "losses attributable to noncontrolling interest should remain in line with the last quarter." - Actually jumped from $25 million to $57 million, which drove up GAAP profits.

Q3 2018 letter:

101. "Gross margin of the energy segment should decline slightly in Q4." Actually, they detailed a "significant" drop in margins sequentially from 17.2% to 11.5% due to a number of factors.

102. "Losses attributable to noncontrolling interests should decline significantly in Q4." Company did not say they would flip to effective gains, reducing net income. In fact, Income attributable to non-controlling interests impacted our income statement negatively by $71 million in Q4. The asset backed securitization of auto leases completed in Q4 resulted in a change of ownership structure of those leased vehicles. This required a non-cash charge of $54 million attributable to non-controlling interests. 

Q4 2018 letter:

103. "We are expecting our Model S and Model X deliveries in Q1 2019 to be slightly below Q1 2018." - They actually dropped from 21,800 to 12,100.

104. "We expect that gross margin for Model S and Model X should remain relatively stable compared to 2018". Gross margins dropped over 400 basis points in Q1 2019, despite only a "slight" decrease in Model 3 margins.

105. "We expect that the deployment of retrofit solar systems in Q1 will be slightly lower than in Q4 due to seasonality". Solar deployments were down 36% sequentially to their lowest point in many years (SolarCity days).

106. "We expect our Services and Other business to continue to grow, mainly due to projected used car sales volumes in 2019. We should continue to see further sequential improvements in gross margin throughout this year" . Gross margins fell roughly 1700 basis points sequentially.

107. "As a result, our optimistic target is to achieve a very small GAAP net income in Q1, but that will require us to successfully execute on many fronts including handling logistics and delivery challenges in Europe and China". Guidance later changed to small loss. In the end, a $700 million plus loss was reported.

108. "We are expecting to have positive GAAP net income and to generate positive free cash flow (operating cash flow less capex) in every quarter beyond Q1 2019". At Q1 report, management guides for Q2 loss.

109. Tesla to have Shanghai gigafactory producing 1,000 vehicles a week by end of 2019. Company did not have 1,000 salable cars at end of period.

Conference call quotes / Musk tweets:

Q4 2011:

1. Elon Musk - "Well, I feel confident saying that Tesla does not need to ever raise another financing round."

2. Elon Musk - "And so we'll be able to go to our third-generation pricing kind of $30,000 range."

Q1 2012:

3. Elon Musk (regarding Model 3 launch): "2016 is probably most likely, but something like that."

4. Elon Musk (regarding Model X launch): "Get your car in two years (which implies mid 2014)."

Q1 2013:

5. Elon Musk: "In the U.S. you'll maybe save $200 to $300 a month in gasoline relative to electricity cost if it's your daily driver."

6. Elon Musk (regarding Model X): "We are expecting to start production of Model X towards the end of the next year [2014]."

Q3 2013:

7. Elon Musk: "I think for the X, we are aiming for maybe a few units at the end of next year, but volume production is - it's a high volume production is probably Q2 2015."

Q2 2014:

8. Elon Musk: "But it's, you know, yeah, certainly more than 60,000 I would think." - talking about deliveries for 2015.

Q2 2015:

9. Elon Musk: "I mean if you just take the reservations that have been made thus far, it's well over $1 billion worth of Powerpacks and Powerwalls.

So were looking at maybe, again, just to preface with meaningful uncertainty, $40 million to $45 million in stationary storage in Q4 and maybe as much as 10 times that number in for next year. So it's $40 million to $50 million that this year and 10x of that next year. And I mean that growth rate is probably going to just, keep going at quite a nutty level. It's probably at least a few billion dollars in 2017, somewhat speculative at this point, but I think that's likely.

So, yeah, that's what leads us to think $40 million to $50 million, Q4, maybe 10x that number next year. And then 5x to 10x that number in 2017."

(Actual, after subtracting out SCTY revenues for the year was $97.3 million.)

Q3 2015:

10. Elon Musk: "Well, our goal is to steadily improve gross margin and hopefully exceed 30% on the Model S and Model X vehicles within 18 months, hopefully sooner than that. But it is - it does require quite an intense effort to - for every fractional point of gross margin. So - and that assumes current, there's not some radical shift in currencies that happens again. So the - so if - according to our plans, at least, we would exceed 30% gross margin within 18 months on the S and X line."

11. "Yeah, I think it's likely that we could be in that 1,600 vehicles to 1,800 vehicles range, per week range, in Q1 [2016]."

Q4 2015:

12. Elon Musk: "But nonetheless, despite the lease accounting stuff, we anticipate it being profitable by GAAP standards in Q4 of this year." - Company reached it in Q3, but due to massive ZEV credit sales, and has since profitability has turned quite negatively again.

Q1 2016:

13. Elon Musk: "So as a rough guess, I would say we would aim to produce 100,000 to 200,000 Model 3s in the second half of next year. That's my expectation right now. Yeah, so that's the thing." - Musk has since tweeted production goal for perhaps 40,000 in 2017.

April 2017:

14. Elon Musk: Tesla semi-truck will be unveiled in September 2017 - Date later announced as October 26th. Citing Model 3 unveil and Puerto Rico hurricane rebuild, event pushed back again until November 16th.

15. Musk details he will announce two to four new gigafactories before the end of the year. None were announced in 2017.

July 2017:

16. Musk calls for over 1,630 units of Model 3 production in Q3. At Q2 2017 earnings report, management guides for 1,500 or so - Company only produces 260.

November 2017:

17. Musk says Model 3 production will be in "the thousands" at the end of 2017. Company didn't even build 800 of these vehicles in final work week of the year.

April 2018:

18. Musk admits via tweet that relying on excessive automation for the Model 3 was a mistake, his mistake.

19. Musk says no reason to raise money via debt or equity in 2018. In December, company issues second auto-lease bond. 

Q3 2018:

20. Tesla guidance implies it will not hit 500,000 units of production during the year, and statements about production rising to 10,000 a week have been pushed back.

21. Elon Musk again delays supercharger version 3.0, which was supposed to be out in Summer 2018, now expected to be late 2018, then moved again to early 2019.

2019:

22. Elon Musk says Tesla will produce 500,000 vehicles in 2019. He then clarifies it to a run rate at that amount. Company still fell short by end of year.

Tesla / SolarCity:

June 26th, 2014, regarding Buffalo plant - "At a targeted capacity greater than 1 GW within the next two years, it will be one of the single largest solar panel production plants in the world. This will be followed in subsequent years by one or more significantly larger plants at an order of magnitude greater annual production capacity." - Tesla and Panasonic now targeting 1 GW of module production in 2019.

April 2016 - Musk tweets Tesla will be in India before Model 3 production starts. As of July 2019, company still not there.

November 8th, 2016 - Tesla announces Grohmann Engineering acquisition, and says that under the leadership of Klaus Grohmann, "several critical elements of Tesla's automated manufacturing systems will be designed and produced in Prüm to help make our factories the most advanced in the world.". - Less than two months after deal closes, Klaus Grohmann retires amidst worker concerns about Tesla's plans for the business.

June 2017 - Solar roof installations will begin in June. Did not happen.

July 2nd, 2017 - Musk tweets that he expects completion of first Model 3 production unit Friday. Did not happen, and as of Saturday night company was still doing final checkout.

2018 - Solar roof installations to ramp up this year. Same production ramp target given for 2019 now.

Other items / broken promises:

October 2013 - Musk eyes annual sales of 10,000 in Germany by 2015. In that country in 2015, total was just 1,582 according to TMC, and by the end of 2017 still was only at 1/3 that amount.

November 2016 - Musk promises free long distance charging for Model 3. Nearly a year later, as the vehicle starts with its first few hundred deliveries, company confirms to electrek that no credits will be given for supercharging.

April 2017 - Tesla issues blog post detailing charging plans, including guidance to hit 10,000 superchargers by end of year. According to one leading Tesla watching site, the end of year number did not even hit 8,400.

2017 Shareholder meeting - Elon says "I think we’re on track to be less than half the injury rate of the automotive industry." Comments about improving injury rates each month. End of year data showed this did not happen and was not actually the case.

2017 - Musk promises coast to coast autonomous drive by end of year. Did not happen that year, or in first half of 2018 either.

August 2017 - Musk says smart air suspension coming to Model 3 in about six months. Two years later, there are no current plans to do so.

2018 - Musk promises major autopilot and self-driving feature update in August. Did not come during the month.

2018 - Musk tweets that funding was secured for buyout at $420. Did not have deal in place, later retracted and settled with SEC for large fine and other Tesla / Musk restrictions.

2018 - Tesla expects to have 18,000 supercharging stalls in place by end of year. Company ends year with about 12,000 total.

2018 - Company guides to 100,000 Model S/X deliveries for year, but says they are production constrained by battery cells and that demand outpaces production. Final year tally was 600 units short, despite "high demand", and likely also included fleet sales to rental car companies.

2018 - Tesla announces major restructuring, says it was something difficult to be done then so it wouldn't have to be done again. Less than a year later, company announces another major restructuring in January 2019.

Q2 2019 - Elon Musk says Tesla will launch insurance product in May. A few weeks after May ended, he said it was still waiting on an acquisition as well as some writing of software.

August 2019 - Elon Musk says Tesla will raise price of FSD on August 16th. Four days after that deadline, he says it will be another 4-8 weeks away.

December 2019 - Elon Musk previously said he was certain Tesla vehicles would be fully self driving by end of year.

December 2019 - Elon Musk said gigafactories would be fully solar powered.

June 2020 - Elon Musk tweets out that free supercharging forever will never return. Two days later, marketing e-mails offer free unlimited supercharging on Model S/X inventory vehicles, with no set timetable.

Final tally:

More than 150 total failures, and that's just the ones I've detailed here.

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