In 2018 Elon Musk’s Tesla faced huge production issues, now, according to one venture capitalist, as the company works to remedy those issues it appears that demand for its cars may be waning.
John Engle, President of Almington Capital, writes in Seeking Alpha that as Tesla manages to fix some of its production issues, resulting in a 13 percent rise in Model 3 car deliveries in the fourth quarter, the company now faces a new challenge — lack of demand. While Tesla has still failed to meet its previously projected production goal of 5,000 Model 3 vehicles a week, their delivery of 63,150 Model 3 vehicles in the fourth quarter was a solid improvement. But as the company closes up a supposed backlog of 450,000 vehicles, cracks are beginning to appear.
According to what Engle says are Tesla’s reported numbers, approximately 7,000 Model 3 vehicles are being kept in storage and without buyers. This amounts for approximately two weeks worth of vehicles at Tesla’s current production rate.
While this is not a huge issue, combined with the $2,000 price slash across all of the company’s vehicles in an attempt to offset the phase-out of a $7,500 tax credit for electric vehicle owners, and a general drop in Model 3 sales, it’s understandable why many investors believe that the coming year will show a lack of demand for Tesla’s vehicles. Even as the company plans to expand their European sales, Goldman Sachs sees an imminent “lull in demand.”
Engle notes that it’s unlikely that Tesla will manage to post a profit in 2019 writing:
In Q4, Tesla may try to post another profit. But it may have to unwind some of its one-off moves, as well as bring things like payables into better alignment with normal business operations. That means that, despite the sequential growth in delivery volume, there is little hope that Tesla can post a profit anything like the one it boasted in Q3.
While Tesla may be hoping to run high on the stock market due to its fourth quarter performance, it will be interesting to see if it can continue this success into 2019, but many current predictions for the company are not bright.