Posted by Jack
The Tesla electric car company seemed to be off to a flying start. The companies stock has doubled this year and new orders seemed enough to justify rising stock price compared to it’s actual earning. However, they have hit upon a snag that could send the stock crashing back to the $100 level. First up an order from Norway has been cut by about half and now there reports of a weird hum at high speed that appears to be a sort of feedback loop. Engineers are confident they can fix it. Next, up are reports about the transmissions that have been failing at an alarming rate. Edmunds’ test car recently received its fourth unit while Motor Trend’s test car went through two. If a recall is necessary it could greatly add to the current losses. At $15,000 per drivetrain it wouldn’t take long to affect the cost of Tesla’s “Resale Value Guarantee” program.
Suggestion: If you’re one of the lucky people that bought TSLA stock early on you might want to think about taking your profit soon. It would be a shame to be the guy who hangs on a little too long because you think it could go a little higher and you wind up with zero profit. Apparently I’m not alone on this thinking (see below).
From Seeking Alpha: More reason for investors to consider profit taking… “July’s car crashes resulted in the company’s stock price to drop from $242.53 on July 1 to $218.72 at the close of July 8, causing it to lose over $2.5 billion in market capitalization – all in a week. Despite analysts’ rating of “overweight,” and Tesla’s aggressive expansion of the Supercharger network to lure more customers, investors’ sentiment is clearly not with Tesla and Elon Musk. The company should look to issue statements over the recent crashes as soon as possible and speed things up on the Gigafactory in order to regain investors’ confidence, and subsequently look to impress consumers – and generate sales – yet again with their upcoming CUV, the Model X. Pre-orders look very strong for the Model X. In March, it was reported that over 12,000 units have been ordered, which requires a $5,000 down payment.”
I have seen this issue discussed in a lot of different forums lately. One thing to keep in mind is the way Tesla handles their repairs. Most dealerships when you go in with a complaint (noise on acceleration) the dealership will preform numerous diagnostic tests to determine the problem, once that has been done they will tear the component apart, find the individual pieces that are failing and replace them. This costs the consumer a lot in labor and the cost of the part. Tesla has a different approach that is best described as modular replacement. They perform a diagnostic and then replaces the entire assembly. This process is more affordable to the consumer because they don’t have to wait for it to be rebuilt and the consumer (if not covered under the warranty) will be billed for what they presume went wrong. The entire drivetrain is not bad so it goes back to the factory to be rebuilt/repaired. So just because someone has 2 drivetrains replaced in the first 30,000 miles does not necessarily mean the car is a lemon but rather it could just be standard issues that are being handled in an efficient manner.