Tesla's Model 3: Two Years Late?

The Model 3 is promising, but Tesla is likely to break its delivery goals

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Ryan Vanzo
Sep 19, 2016
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From email leaks to a possible SEC investigation and a foiled merger, Tesla(

TSLA, Financial)and its CEO, Elon Musk, have had a rough couple of weeks.

Still, the future of the companyits impending "Model 3"tentatively remains on tract. Despite rising competitive pressure from the likes of General Motor's (

GM, Financial) Chevy Bolt, Tesla bulls believe the Model 3, armed with its 400,000+ reservation list, will prove doubters wrong.

But will Tesla actually deliver on time?

Tesla says its new Model 3 will arrive in late 2017, but many analysts are extremely wary of that claim, especially given the company's history of dissapointments. Car and Driver Magazine claims the Model 3 will not arrive until late 2019, two years late.

It backs its prediction with a set of formulas that mock Tesla historical troubles.

"Projecting exactly when the Model 3 will go on sale (Actual Launch Date, or ALD) takes sophisticated mathematical analysis that incorporates several important factors, including the inevitable Plat Construction Problems (PCP), whether or not Musk Insults or Sues any Suppliers (MISS), and the Massive Determination Factor (MDF) displayed by Musk in achieving his goals. So starting with an Initial Promised Date (IPD) of Late 2017, the elegant equation looks like this:"

Even Elon Musk has been tempering expectations. Teslas official deadline for the Model 3 is July 1, 2017. Given the incredible complexity and required synchronization between internal teams and suppliers, he has Tesla advertise deliveries in late 2017 to provide some buffer room.

Even that buffer room is up for debate.

On Twitter, Musk said,Tesla is increasing the production ramp as fast as possible, but Id recommend ordering a Model 3 soon if you want 2018 delivery. Some investors may view this as implying that reservations have been incredibly strong, pushing the delivery dates back for the end of a growing customer list. It could, however, portend a production issue.

When asked if "those of us who ordered pre-reveal will see it late 2017? Elon replied only, I think so. His warnings of a 2018 delivery date for some customers may end up being the company's first customers. Late-list reservations may be relegated to 2019, a huge blow considering the growing list of electric vehicle options that customers can choose from.

If you think Tesla will end up meeting its 2017 production target, here's the major reason why that's unlikely to happen, in Musk's own words:

Now, will we actually be able to achieve volume production on July 1 next year? Of course not. The reason is that even if 99% of the internally produced items and supplier items are available on July 1, we still cannot produce the car because you cannot produce a car that is missing 1% of its components. Nonetheless, we need to both internally and with suppliers take that date seriously, and there needs to be some penalties for anyone internally or externally who does not meet that timeframe.

Disclosure: I have no positions in any of the stocks mentioned above and no intention to initiate a position in the next 72 hours.

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Ryan has been covering public equities for more than a decade. He has worked on the investment research teams for several multi-billion dollar hedge funds in San Francisco and New York.