While surfing my usual news outlets I couldn’t help but notice multiple articles talking about how Tesla just hit 400,000 orders for its newest car – the model 3. However, what a lot of these sources aren’t saying is that this isn’t really that big of a deal. Why?
The primary thing is that these orders aren’t set in stone. These “orders” are actually nothing more than risk free deposits that people have put down for the right to purchase a model 3 when it finally goes to production. This, though it gives a great outlook for the sales of the future model 3, can fall apart at any second due to any number of reasons.
1) If the government decides to stop giving such high tax credits to people who own electric vehicles the Telsa becomes less ecoomical to own – resulting in less buyers.
2) People don’t like waiting. The scheduled release date for the model 3 is 2017. However, what happens if there is an issue in the production process and all of a sudden the release date is extended to 2018 or 2019. People may go with a different option and not upgrade to the model 3 when it finally does c ome out.
Alternatively what happens if Tesla goes the way of Fisker? You’ve actually probably never heard of that car brand. Well, they were one of the first brands to try to create a luxury vehicle that was also incredibly economical. Not only that, but they also sat right around the same price range of Tesla. They were around for a few years before going out of business because they just weren’t making money on the cars they were selling and they didn’t have enough capital to keep running a losing business. At this point it is common knowledge that overall Tesla is losing money on every car that they sell. They have yet to see profit, and their net income is almost -$1 billion annually. Not only that, but over the past year or so the amount of money they are losing compared to the amount of money they are making has begun to widen.
As you can see, profitability has become a further and further dream since 2015. Tesla is making a HUGE bet on the model 3. If it doesn’t play out exactly how they are planning, if there are any bumps in the road, this gap could widen even further, and Tesla might just become a distant memory of a company that successfully innovated the space but couldn’t survive in it.