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Jan 5, 2018

Tesla’s Elon Musk just can’t seem to keep up with his ambitious targets

Elon Musk

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Elon Musk is making a habit of blowing deadlines.

In just the latest setback for Tesla’s (TSLA.O) chief executive officer, the company was forced this week to push back its timeline for producing 5,000 of the smaller, less expensive Model 3 sedans per week into the second quarter, about three months later than originally promised. The company delivered 1,550 of those vehicles in the fourth quarter, well short of Musk’s earlier forecast for 2,500 Model 3s rolling off the production line.

It’s far from the first time the rollout of the electric car company’s smaller, more affordable sedan has left egg on Musk’s face. Back on Oct. 2, Tesla said it would build only 260 Model 3s in the third quarter, about one sixth of the original forecast, after Musk famously told employees earlier in the year that getting the program up to speed would put the company in “manufacturing hell.”

The delayed rollout is part of a pattern for Musk, who often sets lofty targets he fails to meet. While widely praised, the Model X SUV was originally slated for delivery in early 2014, but not a single delivery was made until the end of September a year later, after a number of problems with cooling and the complicated gullwing doors held up production.

Even the flagship Model S sedan hasn’t been without its foibles. Battery production shortfalls have cropped up intermittently, and the company says it’s paring back Model S and Model X production in a bid to allocate more resources to the mainstream Model 3. The company plans to produce about 10 per cent fewer of the higher priced, higher margin vehicles in the fourth quarter.

To a degree, the issues facing Musk are of his own making. His ambitious plans for electric vehicle dominance outstripped the global capacity to produce lithium ion batteries, forcing him to build his own Gigafactory production facility in the Nevada desert. Even there, Musk hasn’t been able to meet his goals in ramping up production after faulty software written by a third-party provider ensnared production and required a full rewrite of the code in question.

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But questions remain whether Musk will stretch the Gigafactory too thin even after all the gremlins are excised from the Model 3. The facility is also responsible for the production of Tesla’s Powerpack home and commercial battery system, demanding further resources and more of Musk’s attention.

Musk also has another large-scale battery complex in Australia to build, a rocket company with ambitions to get to Mars, and a new venture he’s dubbed the Boring Company, which he wants to use to create a web of tunnels underneath cities in order to ease surface traffic congestion.

How patient investors will be with Musk’s grand, far-reaching vision remains to be seen. Shares of Tesla have been rangebound over the course of the last six months amid persistent losses, with no sign of profitability on the horizon.

Of particular concern is how much cash the company is going through as it invests in tooling and automation at its Nevada site, with growing speculation among the analyst community Tesla will have to return to markets for more cash as it burns through a billion dollars a quarter – about US$8,000 every minute. The analyst community is perfectly split on the company’s prospects – of the 30 equity analysts who cover the company, 10 rate it a buy, 10 a sell and 10 a hold.