Tesla is down almost 10 percent in morning trading after disclosing in a filing that it’s “four to five weeks behind our previously announced Model S delivery goals.” Production delays and recalls are the dreaded nemeses of electrical vehicle production. Unlike the Nissan Leaf and the Chevy Volt, the problem for Tesla isn’t orders. It’s got 13,000 orders. The problem is scaling production fast enough to meet demand. Elon Musk is notoriously focused on quality control and no doubt wants to avoid the problems that Fisker has had with recalls. Musk is still personally inspecting each Model S that rolls off the assembly line.
Tesla cut its revenue guidance for 2012 to a range of $400 to $440 million, down from an outlook of $560 million to $600 million. So the real risk for Tesla is that customers just don’t want to wait for their Model S. The company actually said that it believes its reservation cancellation rate will decrease once the time gap between reservation, configuring the car and receiving delivery decreases. Given that the company will only get to a weekly production rate of about 400 cars sometime in Q4, it’ll be difficult for the company to hit its 5,000 car 2012 target. All in all, I still think Tesla has a strong 2013 ahead of it, and for investors this dip is a buying opportunity. Tesla is not in the cash crunch that other EV companies are in, and can afford to lose some sales to make sure the product is perfect. Ultimately, I have faith that with Musk’s laser focus on quality and detail, the company will find a way to scale faster.