Tesla (TSLA) - Get Report bulls have had a great year. 

And last Friday, Tesla had reason to celebrate a bit by holding a party for the delivery of the first Model 3s.

But, there is certainly reason to be concerned about the electric car maker's future. TheStreet breaks down three major areas of worry ahead of Tesla'a earnings on Wednesday.

The Tesla Cult Could Turn Violent

On the cusp of the launch of Tesla Inc.'s Model 3, Elon Musk can soon prove wrong the naysayers who doubt his ability to ship 500,000 of the mass model car next year.

Musk's cult of personality has attracted investors who seem to believe they will make their fortune betting with him. However, there is another group that believes with equal or greater conviction that they will get rich by betting against the Tesla founder.

"While it seems there is the 'cult of Tesla' on the long side with its stock price soaring on every whiff of good news, there apparently is also a 'cult of Tesla shorts' which refuses to give up on their thesis and has continued to increase their short exposure in the face of a supercharged price rally," said S3 Partners, LLC Head of Research Ihor Dusaniwsky. "I look at the short side of the market, and Tesla, being the largest U.S. short has been a topic of mine for several years."

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Musk is the Steve Jobs of everything from electric cars and solar power (Tesla), to exploring space (SpaceX) and constructing network of tunnels to eradicate "the problem of soul-destroying traffic" (Boring Co.). He is a celebrity-executive who dates movie stars and conveys an entrepreneurial vision and ambition that might seem naively idealistic if he weren't a self-made billionaire. Alone among Trump's tech cadre, Musk abandoned the White House technology council when the President pulled out of the Paris climate agreement.

If Musk defies the conventions of the automotive and aerospace industries and politics, why should Tesla stock be limited by such quotidian concerns as cash burn and production targets?

Shares of Tesla have gained more than 53% so far this year to $325.26.

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The rally has its skeptics. When Tesla missed second-quarter shipment projections, Goldman Sachs & Co. analyst David Tamberrino lowered his target from $190 per share to $180 on July 5, suggesting in a report that even with the launch of the Model 3, Tesla is likely to miss its production targets. He sees Tesla's cash burn intensifying this year, with the company raising more capital next year.

"Short sellers were so convinced that Tesla stock would fall dramatically and although they were slightly profitable with Tesla's stock price weakening after a first quarter run-up, they were willing to pay stock borrowing fees over 25% in parts of the second half of 2016 which ate up all of their profits and actually caused them to lose money on a net of financing basis," S3 Partners' Dusaniwsky wrote.

The Model 3 could help determine which cult of Tesla, if either, wins out.

"I think it may be a great inflection point -- if pre-orders increase and Musk can actually follow through on his optimistic production predictions, Tesla stock should rally," Dusaniwsky wrote. "[S]o far the shorts have been 'short squeeze resistant' but a sizable price rally might push their tolerance to a tipping point and we might finally see a wave of short covering that would spike Tesla's price like a turbocharger boosts a gas powered car."

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Editors' pick: Originally published July 19.

Tax Credit Loss Could Be Big

The short sellers have good reason to think they will be rewarded.

In April, Tesla saw a massive drop in sales of its electric vehicles in Hong Kong after Chinese officials slashed a tax credit that made it significantly cheaper to buy the company's cars. Without the tax break, the price of a Model S four-door sedan rose almost 60%, jumping to $130,000 from $75,000.

Tesla didn't sell a single car in Hong Kong in April after the tax cut was reduced, according to The Wall Street Journal. By comparison, there were 2,939 Tesla vehicles registered in Hong Kong in March.

The sales dip highlights just how reliant the company's business may be on tax credits. In securities filings, Tesla has warned investors that changes to incentive programs "could have some impact on demand for our products and services." And Hong Kong isn't the first place where it has felt the impact of reduced tax credits. Last year, Denmark began requiring electric car dealers to pay a 180% import tax on vehicles, which caused new electric vehicle registrations to fall 70% in 2016.

The company doesn't disclose vehicle sales by country or region, but analysts say that it's a small portion of Tesla's overall business, accounting for nearly 6% of global sales of Model S sedans, Bloombergnoted. A Tesla spokesperson said the company welcomes government policies that make it easier for people to buy electric vehicles, but that its business doesn't rely on it, citing that it tripled its revenue in China between 2015 and 2016, "despite a massive tariff and no incentives."

"At the end of the day, when people love something, they buy it," the spokesperson told TheStreet. "Hong Kong remains a significant market for Tesla and we continue to sell cars there each quarter."

"When the Hong Kong government reduced the tax exemption for electric vehicles and increased the cost of our cars by nearly 100%, it's to be expected that demand will be impacted in the period immediately following the change, particularly because of the large number who bought just prior to the change being implemented," the Tesla spokesperson added.

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Creative Strategies president Tim Bajarin agreed, saying that he expects sales in Hong Kong to resume, despite the recent slump. Many Chinese Tesla owners are wealthy enough that they'll buy one whether it's discounted or not, he noted.

"The only people buying them are the nouveau rich," Bajarin said. "If they want one, they're still going to buy it."

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Tesla's next threat could come from within the U.S., where the federal tax credit is set to expire. Under the current incentive program, U.S. citizens can get as much as a $7,500 discount off the sticker price of a Tesla model. That's more than 20% off the cheaper Model 3 sedan's price of $35,000.

But the U.S. tax credit only applies to the first 200,000 cars sold by a manufacturer. Tesla delivered more than 100,000 vehicles in this year alone, and has received at least 200,000 orders for the Model 3, so it could approach the threshold soon. Without a tax credit, Tesla's $70,000-plus models may begin to drive away consumers. One reprieve is that there are also state tax credits that can still be applied after the federal tax credit expires.

"It could have a similar impact on demand for those were factoring in a credit on the $70,000 model," said CFRA Research analyst Efraim Levy. "Some people might begin to back off the high-end model because the tax credit was $50,000. There's a big difference between that and $7,500 for the lower-end models."

Tesla's Board...

The last thing an upstart company that is already a hot button name needs are activist investors.

Activist pension funds have been pressing Tesla to shake up its board for months, arguing that too many directors have overly close ties to its CEO Elon Musk.

And the electric carmaker finally took some action this week, but it wasn't exactly the boardroom shuffle insurgent funds had been hoping to achieve.

On Monday, Tesla said it would increase the size of its board from seven to nine and add James Rupert Murdoch, the CEO of Twenty-First Century Fox Inc. (FOXA) - Get Report and Linda Johnson Rice, the chairman of Johnson Publishing Co.

The move comes after a group of pension funds, including the CtW Investment Group, an organization that advises pensions for unions belonging to the Change to Win labor group, California State Teachers' Retirement System and other funds sent a letter to the board in April calling for more independent directors.

The group have argued that the company's board is made up of too many directors overly tied to Musk, including those that won't provide adequate independent oversight. For example, Tesla director Kimbal Musk is Elon's brother, and director Robyn Denholm until recently was an executive at Juniper Networks, which has sold networking equipment to Tesla. Another Tesla director, Brad Buss, was CFO of SolarCity until he retired in February. Tesla last year acquired SolarCity despite shareholder discontent over the deal.

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CtW's executive director, Dieter Waizenegger, suggested that the move may be a good first step, in part because it appears that neither Murdoch nor Rice have a personal or professional relationship with Musk. In addition he noted that the appointment of Rice was also positive in that it increased the board's diversity by bringing on an African American woman.

However, he added that Murdoch was a controversial choice.

James Murdoch, son of media mogul Rupert Murdoch, resigned from both auction house Sotheby's (BID) - Get Report and drugmaker GlaxoSmithKline boards in 2012, in response to his involvement in a phone-hacking scandal at the News of the World tabloid. More recently, last year, more than 50% of independent shareholders at European broadcaster Sky plc (SKYAY) voted against the reappointment of James as chairman. In addition, according to BoardEx, a relationship mapping service of TheStreet, Murdoch serves as a director at News Corp. (NWSA) - Get Report .

Now investors in Tesla are taking a closer look at his appointment and whether they will want to launch a "just vote no" campaign against the director in 2018 at Tesla's next annual meeting. Tesla would not be required to respond to any large negative vote Murdoch receives but any major negative vote could be embarrassing for the company.

"His appointment clearly should give any board member pause," said Waizenegger. "If a board is nominating someone with that record that is important that that person gets more scrutiny. I've heard from investors that they are worried about James Murdoch being appointed."

Waizenegger also raised concerns about what additional skills Murdoch and Rice bring to the oversight table, noting that they both have a strong media background, which seems duplicative. "The company should produce and disclose a skills metric, providing information about the strategic value and expertise each individual member brings to the board," he said. "How do they match up with the company's strategy?"

Last month, Tesla was dealt a large blow after a large minority of investors urged the electric car maker to have annual elections for its directors, a major rebuke to Musk and one that likely contributed to the company's move to bring in two new directors. About 47% of the votes not controlled by directors and officers backed a shareholder proposal on the subject. Musk himself owns a 22% stake.

Activist investors and governance experts prefer annual director elections, in part because they contend that board members should be accountable to investors on an annual basis. The big vote suggests that a large group of outside shareholders weren't happy with the makeup of the board.

"When directors stand for election annually there is more accountability to shareholders," Waizenegger said. "If you have a board that is very insider-controlled having additional accountability in the form of an annual director election is a critical mechanism."

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