Even the hype machine known as Elon Musk sleeping on a production room floor couldn't stop this one.
Tesla Inc. (TSLA) shares fell sharply in pre-market trading Tuesday after the carmaker said it would temporarily suspend production of its Model 3 sedan in order to address "bottlenecks" at its Fremont, California facility.
The move, which was first reported by Buzzfeed and later confirmed by the company, marks the second time Tesla has halted Model 3 production this year and could raise further questions as the whether the company will be able to meet its aggressive assembly targets and generate the kind of revenue it will need to become cash flow positive in the coming quarters, something founder and CEO Elon Musk said last week was imminent.
Tesla shares were marked 1.96% lower in pre-market trading in New York, following yesterday's 3.04% slump, indicating an opening bell price of $285.50 each, a move that would take its year-to-date decline to around 8%. However, Tesla shares have lost about 25.8% since hitting an intra-day high of over $385 last June.
Tesla said on April 3 that it produced 2,020 Model 3s over the previous seven days and would make a further 2,000 in the subsequent week. Tesla said it will produce 5,000 of the vehicles per week "in about three months".
"This is the fastest growth of any automotive company in the modern era," the company said at the time. "If this rate of growth continues, it will exceed even that of Ford and the Model T."
However, analysts expect Tesla will need to raise $2 billion to $3 billion within a year or so as it faces debt maturities and cash burn. A $230 million convertible bond maturity comes in November, and another $920 million comes due in March 2019.
Musk, for his part, has both vowed to sleep in his Freemont, California factory until the company's production woes are put right and rejected suggestions Telsa will need to raise cash in the coming months.
The Economist used to be boring, but smart with a wicked dry wit. Now it's just boring (sigh). Tesla will be profitable & cash flow+ in Q3 & Q4, so obv no need to raise money.— Elon Musk (@elonmusk) April 13, 2018
TheStreet's Eric Johnsa notes that, while Musk might have secured some investor support for his pledge to take control of production, "it's worth keeping in mind that Tesla's high fixed costs and the scope of its production ramp -- the company aims to eventually reach a Model 3 production rate of 10,000 units per week, up from a current level of around 2,000 -- mean that even moderately outperforming analyst production and delivery estimates can have a big impact on its income and cash-flow statements."