In February, Tesla said 2018 was "a year of change for us". But the transformation so far is probably not the way the company had in mind.
The company's shares crashed after a person died in a Tesla Model X crashed and caught fire on March 23. On Tuesday, Moody's downgraded the company's credit rating and found that Tesla spent $ 2 billion a year on cash every year.
On Thursday morning, Nomura Instinet analyst Romit J. Shah, the most optimistic of those who followed Tesla, cut his robust price target to $ 420 a share, an $ 80 cut. "As long as they can avoid a recall of the brand I think they will last, "he said in an interview on Thursday.
Five hours later, Tesla recalled 123,000 Model S sedans built before April 2016 after it was discovered that corrosive bolts in cold weather could lead to power steering failure.
The recall includes almost half of the cars that Tesla has sold. The company said it acted proactively and that the defect did not cause any accidents or injuries.
After two days of sharp downturns, the Tesla share closed at $ 266.13 on Thursday, an increase of 3.3 percent. The recall erased this profit in after-hours trading.
Behind all of this is Elon Musk, the tireless salesman and visionary who has captured the imagination of investors for everything from a super fast underground hyperloop to space travel to Mars.
But Musk is struggling with the more prosaic mission of assembling a car here on Earth. And when you explain a series of production errors in the last two years, some analysts have said that Musk has undermined its own credibility by repeatedly over-promising. For example, in May 2016, he said in a profit call that "as a rough guess, 'Tesla' would aim to produce 100,000 to 200,000 Model 3 in the second half 'of 2017. Sales of Model 3 during this period totaled only 1,770.
Then, in August 2017, Musk said, "We believe we are on track to reach a 5,000-unit week by the end of this year." He added, "What people should not worry about is Tesla. By the end of next year, a production week of 10,000 units will be reached." Musk said until October it was "the hell of hell" and the company's current forecast for 5,000 Type X vehicles per week until the end of June. Investors are waiting to see the actual results.
"The company's continued production delays since the launch of the Model 3 represent a significant departure from its original expectations," said Moody's on his downgrade on Thursday. "Tesla's ability to meet the updated weekly production targets of 2,500 by the end of March and 5,000 by the end of June will be a critical factor in assessing the company's production capacity and credibility in producing production forecasts."
In October 2016 and March 2017, Musk downplayed the likelihood that Tesla would have to raise money to fund its expansion. Tesla won $ 3 billion in 2017, more than half of it in bonds now considered scrap.
For some investors, Tesla is a classic hype. Founded in 2003, it has not made a profit. It relied heavily on a zero emission scheme in California, which in 2017 was a grant of $ 280 million. For the entire tire surrounding Musk, Tesla sold just 50,145 cars last year, which equates to 0.29 percent of the American auto market. Even so, even after a lazy trading week, market capitalization is still just below that of General Motors, which sold 3 million cars in the US last year – and earned $ 12.8 billion in non-recurring items.
Tesla's fast-growing revenue – $ 11.7 billion last year – was fueled by generous tax breaks at federal and state levels. But investors who believe the company is overvalued note that if tax subsidies are lifted, as in Georgia, Hong Kong and Denmark, then Tesla sales fall.
Although the tax bill signed by President Trump has withheld the US $ 7,500 tax credit for the purchase of electric vehicles, the tax credit will begin after a sale of 200,000 EVs, a threshold Tesla and GM are expected to reach this year , Not only will this reduce incentives to buy a Tesla or GM, but it will also put Tesla and GM at a competitive disadvantage over manufacturers such as BMW, Volkswagen and Volvo, which are well below that threshold.
While Tesla will increase capacity, albeit too late, Moody's warns of impending competition in the electric vehicle market. By 2021, at least 36 new electric vehicles will be launched by traditional automakers. Moody's said Tesla "does not have a sustainable technological advantage; essentially, all technologies in Tesla vehicles (or some similarly effective alternative technologies) will be available to competitors."
For others, Tesla is the tech Giant of the future. Shah, who follows Tesla for Nomura Instinet, is a tech analyst and not a car industry analyst. He compares Tesla with Intel in the 1990s when there was a bottleneck in microprocessors that Intel solved. And he says consumers' appetite for a new Tesla car model – with thousands of hours of stockpiled inventory – is offsetting consumer interest in early iPhones.
And so Shah Tesla compares with Apple, Intel, Nvidia and Google, not with Ford Motor or GM. He measures the stock price as a multiple of revenue, and he says that no auto company has revenues like Tesla.
"I would bet on Elon," Shah said in an interview. "This is the guy who started two early industrial manufacturing companies in 2008 and kept it alive with a combined market capitalization of over $ 60 billion." Now, he says, Musk employs 37,000 people, many of whom want to take over half of compensation in stock.
"Part of our enthusiasm for Tesla is the brand," Shah said. "It's a phenomenal brand."
He also believes that Tesla has a technological advantage despite Moody's assessment. He says Tesla's batteries, manufactured at its gigafactory in Nevada, are far more advanced than the industry average, giving Tesla's cars greater range and possibly even lower prices. "That leadership they have will only expand," he said.
Nevertheless, there are widespread doubts. The number of short sellers – investors who make money when a stock price falls – is unusually high at 22.53 percent of outstanding shares.
Musk owns 19.9 percent of the company, but several other major shareholders have sold out in recent months. Toyota sold all its shares last summer, and by the end of last year Wellington Management, a private investment firm, sold almost all of its shares. Others have reduced their positions.
One buyer: Goldman Sachs, who was an underwriter for Tesla shares and debt securities.
Tesla has also lost a number of top executives, including the Chief Financial Officer and the Human Resources Manager. One of the departing executives was the Chief Accounting Officer, who gave up work after 18 months and gave up millions of stock grants that had not yet been earned. A few days later, the treasurer left.
There were also departures from battery technology senior executives and the co-founders of SolarCity, the ailing solar installation company that Tesla bought in 2016 for $ 2.6 billion.
The co-founders of SolarCity are cousins of Musk. Minority shareholders who have objected to this purchase have filed a lawsuit against the CEO of Tesla and its board of directors. On Wednesday, the Delaware court said the case could move forward.
Although Tesla car reviewers generally give good grades, the company's financial engineering remains a problem area. In addition to spending $ 2 billion a year in cash, the company has $ 230 million in debt due in late 2018 and $ 920 million due in late 2019, Moody's said.
Tesla has $ 3.4 billion in cash, but its resources "will not be enough to meet those cash needs in the future," said Moody's. "We expect the company to likely have access to the capital markets in the near future in order to raise significant capital."
A worrying indicator: Tesla's liabilities to suppliers increased from around $ 1 billion two years ago to nearly $ 2.5 billion in the third quarter of 2017, well above the Tesla.
If the company maintains its expected pace of expansion, it will likely need to raise additional capital in 2019 to finance the growth of the Model 3 and the development of two new vehicles that Musk has announced, the electric semi-trailer and the new Model Y  But now the focus is on the Model 3, which some have called the Camry Killer, a car as low as $ 35,000 (though most car reviewers have driven the $ 59,000 version with added bells and whistles).
About 400,000 people have spent $ 1,000 on the car, but it remains unclear whether Tesla can stake a larger share of the auto market for middle incomes. It certainly will not be able to iron out without production disruption. Moody's expects Tesla to produce no more than half of the model 3 originally planned for 2018.
A potential competitor is Chevrolet's Bolt EV. GM sold 23,000 of the Bolt in 2017, though it was only sold in all 50 states in the middle of the year. It's the only car except Tesla that breaks through the 200-mile barrier. And at a much cheaper price.
Among other things, Jaguar has unveiled its new I-PACE electric SUV, which will be available in showrooms this summer. It initially costs almost $ 10,000 less than the Tesla Model X. Audi also has a rival car that would be $ 14,000 cheaper.
But the people who drove the company's value into the league of Ford and GM expect much more from Tesla and Musk.
"I think he and what he created is incredible," Shah said, "and I do not think you can bet against them."
Asked if Tesla could turn out to be a profitable niche maker, Shah disagreed.
As he puts it, "Something tells me that they will either go to the stratosphere or go down to the basement and the results will be binary."