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3 questions to CEO Elon Musk – The Motley Fool



Electric Vehicle Manufacturer Tesla (NASDAQ: TSLA) is expected to announce its fourth quarter results on Wednesday. After a recent surprise announcement that the company has fired 7% of its workforce to cut costs, the quarterly update is under scrutiny. Just as Tesla needs to increase production of its Model 3 to increase economies of scale, debt needs to be raised in March.

Does Tesla's findings contribute to investor confidence or just raise concerns about the crisis The company's ability to manage a capital-intensive production ramp-up of its largest-volume vehicle to date?

Prior to Tesla's fourth quarter results, there are three questions that Tesla CEO Elon Musk will focus on during the quarterly bidding process.

  A red Tesla model 3.

The Tesla model 3. Source: Tesla.

. 1 Why not raise funds?

One simple question that analyst Musk might ask during the call is why the company is not simply capitalizing on its growing pains. While cutting costs can address issues in the short term, there is no way around that Tesla's workforce needs to continue to grow as production and supplies increase. And with Tesla just expanding Model 3 deliveries to Europe and Asia this quarter, stronger vehicle delivery growth is expected in the coming quarters after 12 months.

Sure, it makes sense for Tesla to avoid additional debt. But why not raise money by selling equity and providing capital to both reduce debt and make strategic investments? The dilution of shareholders from the sale of equity could easily be offset by the benefits of reduced risk in the company's balance sheet and additional investment in Tesla's growth opportunities.

. 2 Is there a clear path to a cheaper model 3?

Musk's recent letter to co-workers describing Tesla's cost-cutting plan also highlighted the importance of bringing lower-priced versions of Model 3 to market. The letter implied that Tesla had outstripped the market for people who could afford their current Model 3 versions, which start at $ 44,000, in North America.

[W] We need to move on to cheaper variants of the Model 3 … The need for lower priced versions of the Model 3 will be even bigger on July 1st, when the US tax credit will be halved again, making our car $ 1,875 more expensive, and at the end of the year, when it completely disappears. [19659013] The big question for Musk is: is there a clear path to cheaper versions of Model 3? Or is the idea of ​​a cheaper model 3 for this summer an elusive goal?

. 3 Where does the production of Model 3 come from here?

Finally, investors will look for information on what to expect from the production of Model 3 in 2019. Tesla had announced in its second quarter that it had the goal to produce 6,000 Model 3 vehicles per week at the end of August and increase production to a higher level in the next few quarters. Tesla produced an average of less than 5,000 vehicles per week in the fourth quarter of 2018.

Is Tesla now producing 6,000 Model 3 per week? What is the goal of the weekly production rate for the vehicle that Tesla is now targeting?

Tesla reports fourth quarter financial results after market close on Wednesday, January 30. It will host a live question-and-answer session the same day at 14:30 PST.


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