Tesla’s Q3 earnings report was painful. So painful in fact, CEO Elon Musk described the company as being in the “eighth level of hell.”
The company reported a loss of $619 million attributed to common shareholders in the three months that ended September 30, compared to a profit of $22 million a year ago. On an adjusted basis, Tesla’s per-share loss of $2.92 was wider than the $2.28 consensus estimate by analysts.
But that wasn’t the only bad news.
On Wednesday, the electric carmaker updated its website for customer reservations for its Model 3 to say that the new $35,000 model wouldn’t be available until some time next year. With this news, Tesla’s stock price fell nearly 9% on Thursday, the most in more than 16 months.
So far this year, the automaker has delivered only 222 of the affordable all-electric sedans. That’s far fewer than the 5,000 per week Musk had predicted the Model 3 production line would be turning out by the end of this year, and just a tiny dent in the waiting list of 400,000 people who have paid $1,000 deposit for the new vehicle.
The delay can be traced to a bottleneck at the company’s famed Nevada Gigafactory where the company builds the batteries for its cars. According to Musk, an outside supplier responsible for part of the process of assembling the battery modules “dropped the ball,” forcing Tesla to take the work in-house. “We had to rewrite all of the software from scratch and redo many of the mechanical and electrical elements,” he said. “This is what I’ve spent many a late night at the gigafactory working on.”
“In the grand scheme of things this is a relatively small shift,” Musk said on the earnings call. The question now is, how much longer will customers and shareholders keep the faith.
“They are making some big promises, and they need to show a path to get there,” said R.A. Farrokhnia, a business and engineering professor at Columbia University. While the car business is a notoriously tough one, building a just a few cars when you’ve promised thousands isn’t enough. Tesla’s task now is to convince investors there’s some forward momentum on delivering what it has promised, “Or they’re going to crash and burn at some point,” Farroknia said. “Reality will catch up with them.”