Top Three Challenges For Tesla Motors Inc (TSLA)

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Tesla Motors Inc (NASDAQ:TSLA) has come a long way establishing its brand value. The company has had to face several issues before getting recognized for its innovation in the electric vehicle division. However, that does not mean that it would not have challenges ahead of it. As the company grows, the challenges also increase. In the same way, it has also learned the art of managing the challenges despite some hiccups. For instance, it faced challenges in meeting the production of vehicles last year. Similarly, it faces at least three challenges now from within and outside the company. It might struggle initially but eventually succeed it if the past is any indication.

Slow Pickup In Model X Sales

The first and biggest challenge for Tesla Motors Inc (NASDAQ:TSLA) is the immediate concern on slow pick up of sales in Model X electric vehicle as its delivery started only at the end of September. JPMorgan Chase & Co (NYSE:JPM) analysts, Ryan Brinkman and Samik Chatterjee, were worried over the slow start of Model X production probably due to some issues with ‘falcon wing’ doors or any other design features.

The brokerage boosted the third quarter expected deliveries in line with the company’s based on the recent announcement that deliveries were stronger than 11,580 units in respect of Model S. However, Tesla Motors Inc (NASDAQ:TSLA) Model X delivery missed estimation of JPM’s 50. The two analysts believe that this would percolate into the fourth quarter. While estimating lower loss per share for the third quarter, the brokerage reduced its fourth quarter and full-year earnings projection citing weaker than predicted Model X deliveries. The company needs to address it on a war-footing. The brokerage lifted its December 2016 price target modestly to $180 from December 2015 price objective of $178.

Establishing A Gigafactory

Recently, Tesla Motors Inc (NASDAQ:TSLA)’s CEO, Elon Musk, tweeted that the company might consider India for establishing a Gigafactory at some point in time. He believes that the high demand from the domestic circuit would make sense to establish the factory in the long-term. Also, several Indian rural populations do not enjoy complete electricity whereas most of the other parts are facing the daunting challenges for grid connectivity. Also, pollution is becoming a big nuance.

India is encouraging investments in solar power and estimates producing 100 GW of solar power by 2022. The country is hoping to attract $100 billion investments in the energy sector in the next seven-year period. The mass production in India would also allow Tesla Motors Inc (NASDAQ:TSLA) to reduce costs of its battery, which would in turn cut down the costs of the electric vehicle. The company’s move is a follow up to Indian Prime Minister’s Narendra Modi’s invitation to set up a battery factory in the sub-continent.

Autonomous Car

The third challenge would come from the autonomous car for Tesla Motors Inc (NASDAQ:TSLA). Though the debate is raging whether the world is ready for a self-driving car, Alphabet Inc (NASDAQ:GOOGL) has been involved with the project for quite some time. Similarly, there are rumors that Apple Inc. (NASDAQ:AAPL) is also developing an autonomous car. However, experts call for better-driving cars than technologically challenging car.

In any case, it is most likely that such autonomous vehicle might be electric vehicle only. Both the technology companies enjoy a good brand value. The electric vehicle maker is also facing a challenge from General Motors Company (NYSE:GM) on an electric car. When Tesla launches its Model 3 car, GM will also be armed with a similar electric car to take on. A tough challenge will be in the cards on the mass market vehicle. GM will also price the mass market car lower than Tesla inviting a price war between them when both unveil their products next year.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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