Tesla ramps up production forecast

Nikola Tesla was a strange man. At least from all of the reading that I have done. He moved to New York a couple of years before the founding of our city, Jozi. There he worked for another inventor, Thomas Edison. There was a dispute between the two over a pay issue, Tesla resigned and started with his own string of inventions, including developing a patent for a biplane (it was 1915) that could take off vertically. A list on Wikipedia is a testament to his extraordinary and perhaps unrecognised brilliance -> List of Nikola Tesla patents. He was a dashing, weird, obsessive workaholic, who repeated the ordinary and suggested to all that he never slept.


Sound familiar? Workaholic, hardly sleeps inventor who is busy with craft that go straight up, once crossed by his brilliant work colleagues (whilst in the air on his way to enjoy a honeymoon). Yes, that is Elon Musk. And the company (one of them) that he runs is Tesla, named after the eccentric inventor of yesteryear. The noticeable difference between the two is that Elon Musk has built an incredible empire in a relatively short space of time. That is worth something. It is hard to believe that Musk turns 45 at the end of next month. The inter-webs tells me that Musk is "worth" 13 billion Dollars. Nikola Tesla died a pauper, with debts owed to various hotels, restaurants and others. Ahead of his time no doubt.


And perhaps Musk is too, ahead of his time. If you haven't read the Elon Musk book, you really should, it is nothing short of fabulous -> Tesla, SpaceX, and the Quest for a Fantastic Future . Enough of that, the comparisons are obvious to the past and to the modern day Iron Man, one thing is for certain, you need people like this to change the future. I asked my kids what they think about him, the failed relationships and all. Their overwhelming feeling was that he must continue to save the planet from excessive emissions and future endeavours. If he doesn't do, who will, they asked.

Tesla reported numbers two nights back, Tesla First Quarter 2016 Update. The big surprise was that the company have aggressively brought forward their aggressive roll out of the Model 3, perhaps in response to the overwhelming and unprecedented demand for the product. It is, by all counts, the most successful launch of any consumer product. Ever. As Chamath Palihapitiya points out in this article titled Hey Jerkwater: Do your math on TSLA ... , it took Apple roughly two years to reach that sort of sales number. You could well argue, and it is valid, that Apple have the capacity to product the phones on time, and have the capital to roll this out without too many problems.


Tesla, that is very different. Elon Musk suggested that they will have to raise more capital. Jim Cramer of Mad Money fame suggests that Musk's transparency is shameless, he is talking things up to raise more money. The other reason is that he loves the thrill of setting impossible (for ordinary people) targets. This is an amazing article that nails it - Why Elon Musk Keeps Promising the Impossible. The reason is that he needs everyone to be on board. Whilst two major manufacturing execs have jumped the board, just before the company reported a 12th consecutive quarterly loss, Elon Musk has his desk and a sleeping bag at the end of the production line, as you can see at the end of the article - No need to worry-Elon Musk's desk is right at the end of the Tesla production line.

So the company makes a loss, their delivery record against the projections have fallen flat, this business has nearly run out of money and got a last minute reprieve moments away from waving the white flag. Their targets are incredibly ambitious. Various Wall Street types think that he is mad, and that as an investment, you are equally mad. Short interest in Tesla has been trimmed somewhat, ahead of the recent results, just over 29 million of the 133 million shares in issue are currently short the stock, or nearly 22 percent of all the shares. There are certainly many people, even at nearly one quarter or so below their 52 week highs that think this company will hit the proverbial skids.


So why own a company of this sort at all? Surely the disappointment of another production miss and manufacturing troubles along the way will lead to a massive re-rating of the shares? You are actually owning the company for a few reasons only. Expectations are if the company can deliver on the aggressive projections, they will become profitable, the demand is most certainly there from the broader public, not just fine car lovers. Although as we have said before, the new Model 3 is a soft luxury product, not an ordinary sedan. You own this business for the visionary, the beautiful product, which is the most important thing at the end of the day, you own this business as a result of changing perceptions of rich people about the planet we live on, future trends of battery technologies. If you must own them as part of a bigger and diversified portfolio, expect an extremely volatile ride, expect the price action to be wild, you need a strong constitution. If you had to side with one man that well may change humanity, you certainly have an outlet to own a piece.