Bye-bye color options.
Tesla Inc. (TSLA) shares slipped lower Tuesday after founder and CEO Elon Musk said the carmaker was reducing the choice of colors from some of its models in an effort to "simplify" production, a move that could suggest the group is struggling to reach its own aggressive delivery targets.
Musk Tweeted that two of the colors being removed from the base of seven available choices -- obsidian black and metallic silver -- would still be available for potential buyers, but at a higher price than the other models. The decision follows one of the best days for Tesla shares in nearly a month yesterday as investors reacted to analysts' reports that suggested the Palo Alto, Calif.-based group would meet Model 3 production targets over the second half of this year.
"We are about to have the most amazing quarter in our history, building and delivering more than twice as many cars as we did last quarter," Musk wrote in an email to employees that was widely circulated Monday.
Moving 2 of 7 Tesla colors off menu on Wednesday to simplify manufacturing. Obsidian Black & Metallic Silver will still be available as special request, but at higher price.— Elon Musk (@elonmusk) September 11, 2018
Tesla shares were marked 3.3% lower Tuesday and changing hands at $276.01 each, a move that stills leave the stock some $16 higher than Friday's low but still 34.3% shy of Musk's now-abandoned target to take the company private at $420 per share.
Tesla said it surpassed its own Model 3 production target of 5,000 vehicles per week in July, with Musk declaring that the group would boost that output to 6,000 a week by the end of August. Bloomberg's closely-tracked Model 3 production monitor, however, suggests the current pace is about 3,500 a week at its Fremont, California manufacturing facility.
Tesla shares have fallen around 18.6% since the start of the third quarter, and plunged to the lowest level in five months Friday following news that a key short-seller is suing the clean-energy carmaker for allegedly misleading investors over plans to take the company private and a radio interview that raised further questions over the judgement of founder and CEO Elon Musk.
Shares extended also declines after the company said its chief accounting officer, Dave Morton, had resigned after less than a month in the job.
Analysts are expecting the group to report a third quarter earnings per share loss of 42 cents next month before rebounding sharply to 74 cents a share in the final three months of the year. However, with a cash burn rate of $739 million last quarter, any chance of meeting profitability estimates will rest on the group's ability to push Model 3 production closer to its 6,000 target in order to generate faster end sales and deeper quarterly cash flows.
"It took 15 years to execute on our initial goal to produce an affordable, long-range electric vehicle that can also be highly profitable," Musk and Chief Financial Officer Deepak Ahuja said in a letter to shareholders earlier this summer. "In the second half of 2018, we expect, for the first time in our history, to become both sustainably profitable and cash flow positive."
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