The "unpainting" oneself from a corner explanation of some Tesla behaviors
Every now and then Tesla makes a statement in order to counter a threat, but that statement may not serve Tesla in the long run, and some reversal is necessary.
As a case in point, I was one of the doubters who stated that Tesla would never produce a 70kwh Model X. Quite simply, for a premium vehicle, 219 miles range was simply too little (I base this statement on my 50 state drive in a 240 mile range Model S last summer). The sweet spot for an entry-level premium vehicle is about 240 miles with the current supercharger level of development in most parts of the country. When critics called the X a $130,000 vehicle, Musk countered that the X would only be about $5,000 more than a comparable Model S, and a 70kwh version of Model X would be offered. Boom, the $130,000 X criticism vanished. To extricate Tesla from this corner it painted itself into (too low a range for a premium vehicle), Tesla invented a 75kwh battery, which brings X into the sweet spot for a min range.
Now look at the 1Q16 ER, when Tesla was trading below $150/share. To deal with fears that Tesla needed another capital raise and the environment was unsuitable for a capital raise, Musk laid out the scenario of Tesla generating enough funds internally to fund the Model 3 program. This was, in fact, a workable (but perhaps not optimal) plan. Investors liked this explanation and a self-funding approach became the expectation. TSLA reversed its slide and shot to over 200. I agree with Julian that Musk was likely NOT surprised by Model 3 demand. Musk very early started fishing for an explanation to extricate Tesla from limiting itself to a self-financing approach. Yes, Tesla could self-finance Model 3 intro, but was this the correct approach? Remember when one of the TV networks did a poll and 12,000 people responded that they would like to order a Model 3? Musk replied that he might have to rethink Model 3 production planning. That was a strong clue about where Musk wanted to go. Then when hundreds of thousands of Model 3 deposits came in, Musk repeated the statement that Tesla needed to rethink the production plans for Model 3. There's no guarantee that Tesla will raise capital by the end of summer, but I think it's likely, considering the steps that Elon has taken to justify a reversal of the self-funding-only approach.
Every now and then Tesla makes a statement in order to counter a threat, but that statement may not serve Tesla in the long run, and some reversal is necessary.
As a case in point, I was one of the doubters who stated that Tesla would never produce a 70kwh Model X. Quite simply, for a premium vehicle, 219 miles range was simply too little (I base this statement on my 50 state drive in a 240 mile range Model S last summer). The sweet spot for an entry-level premium vehicle is about 240 miles with the current supercharger level of development in most parts of the country. When critics called the X a $130,000 vehicle, Musk countered that the X would only be about $5,000 more than a comparable Model S, and a 70kwh version of Model X would be offered. Boom, the $130,000 X criticism vanished. To extricate Tesla from this corner it painted itself into (too low a range for a premium vehicle), Tesla invented a 75kwh battery, which brings X into the sweet spot for a min range.
Now look at the 1Q16 ER, when Tesla was trading below $150/share. To deal with fears that Tesla needed another capital raise and the environment was unsuitable for a capital raise, Musk laid out the scenario of Tesla generating enough funds internally to fund the Model 3 program. This was, in fact, a workable (but perhaps not optimal) plan. Investors liked this explanation and a self-funding approach became the expectation. TSLA reversed its slide and shot to over 200. I agree with Julian that Musk was likely NOT surprised by Model 3 demand. Musk very early started fishing for an explanation to extricate Tesla from limiting itself to a self-financing approach. Yes, Tesla could self-finance Model 3 intro, but was this the correct approach? Remember when one of the TV networks did a poll and 12,000 people responded that they would like to order a Model 3? Musk replied that he might have to rethink Model 3 production planning. That was a strong clue about where Musk wanted to go. Then when hundreds of thousands of Model 3 deposits came in, Musk repeated the statement that Tesla needed to rethink the production plans for Model 3. There's no guarantee that Tesla will raise capital by the end of summer, but I think it's likely, considering the steps that Elon has taken to justify a reversal of the self-funding-only approach.
