Skip to main content

Breaking News

Breaking News
Cooper expects JV plant in Vietnam to be producing truck tires by ‘early 2020'
Close
Sister Publication Links
  • Rubber & Plastics News
  • European Rubber Journal
tb-logo
Subscribe
  • Login
  • Register
  • Subscribe
  • News
    • AUTO INDUSTRY
    • BUSINESS/FINANCIAL
    • COMMERCIAL TIRE
    • FACTORY FIXES
    • GOVERNMENT & LAW
    • INTERNATIONAL
    • MOTOR SPORTS
    • NEW PRODUCTS
    • RETAIL TIRES
    • SERVICE ZONE
    • SEMA/AAPEX
    • SMALL BUSINESS
    • TIRE MAKERS
    • SPONSORED CONTENT
    • Many lessons learned — and some under way — on electric vehicle battery safety
      ETRMA backs revised EU tire labeling text
      Rancho introduces 3-inch suspension system for 2014-20 Ford F-150s
      Don't be fooled by VW's long-running fan
    • Trelleborg launches major restructuring program; tire/wheel business unaffected
      Pirelli to cut costs, contain investments in 2020-22 period
      USTMA raises 2019 shipment forecast slightly on expected aftermarket gains
      Hankook to supply German touring car series' DTM Trophy ‘feeder series'
    • USTMA raises 2019 shipment forecast slightly on expected aftermarket gains
      Kal Tire opens OTR tire retread plant in Mexico
      Aeolus, Onyx discussing TBR joint venture in Sri Lanka
      Cooper expects JV plant in Vietnam to be producing truck tires by ‘early 2020'
    • S.C. targeting illegal tire dumps via 'See it/Report it' campaign
      USTMA calls on all stakeholders to help raise scrap tire recovery rate
      NFIB holding webinar Dec. 4 on new federal overtime rule
      ETRMA backs revised EU tire labeling text
    • Nexen donates meals, tires to Cityzens Giving soccer program
      Trelleborg launches major restructuring program; tire/wheel business unaffected
      Pirelli to cut costs, contain investments in 2020-22 period
      Hankook to supply German touring car series' DTM Trophy ‘feeder series'
    • Hankook to supply German touring car series' DTM Trophy ‘feeder series'
      Americas Rallycross folds after 2 seasons
      Australia's Supercars series renews tire supply deal with Goodyear/Dunlop through 2024
      BKT extends Monster Truck sponsorship deal through 2026
    • Sentury custom Jeep highlights Landsail Rogueblazer tires
      Yokohama adds winter fitment to grader tire line
      Rancho introduces 3-inch suspension system for 2014-20 Ford F-150s
      Nexen targets growing CUV/SUV market segment with Roadian GTX
    • Auto Plus gifts Mustang GT to 'Performance Promotion' winner
      Akebono names AAPEX 'guess the number' winners
      TECH Tire Repairs launches new e-commerce site
      Jack Hone, former publisher of Tire Review, dies at age 81
    • Many lessons learned — and some under way — on electric vehicle battery safety
      Auto Plus gifts Mustang GT to 'Performance Promotion' winner
      Akebono names AAPEX 'guess the number' winners
      TECH Tire Repairs launches new e-commerce site
    • Sentury custom Jeep highlights Landsail Rogueblazer tires
      view gallery
      25 photos
      Photos: A look back at 2019 SEMA, APPEX Shows
      Detore: Assessing the glitz, glamour of SEMA
      AAPEX eyes tire service as part of Repair Shop HQ at 2020 show
    • NFIB holding webinar Dec. 4 on new federal overtime rule
      Tennessee couple named Milex franchisees of the year
      Fight the battles to win the war
      Industry challenges stubbornly persist decades later
    • Sentury custom Jeep highlights Landsail Rogueblazer tires
      USTMA calls on all stakeholders to help raise scrap tire recovery rate
      Apollo enters Saudi Arabian market via tie-in with local distributor
      Nexen expanding outreach to U.S. veterans with Purple Heart pledge
  • Opinion
  • Multimedia
    • VIDEOS
    • PHOTOS
    • PODCASTS
  • Events
    • LIVESTREAMS
    • WEBINARS
    • SEMA LIVESTREAMS
  • Data
    • DATA STORE
    • DIRECTORY
  • ADVERTISE
  • Classifieds
  • DIGITAL EDITION
MENU
Breadcrumb
  1. Home
  2. News
May 11, 2016 01:00 AM

How Musk tries to win big by falling short at Tesla

Tom Randall, Bloomberg News
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print
    (Bloomberg News photo)
    “Now, will we actually be able to achieve volume production on July 1 next year? Of course not,” Tesla Motors Inc. CEO Elon Musk told investors recently.

    NEW YORK (May 11, 2016) — Tesla Motors Inc. CEO Elon Musk is known for making the future come early.

    Yet somehow he's always running behind schedule. Some would call this a failure of management, but it might just be a business strategy. Call it the “Musk Doctrine.”

    It goes something like this: People do paradigm-shifting work only when they're under tremendous pressure, so the key is to ensure deadlines are always impossible. This could help explain why Mr. Musk has never launched a product on time, yet no one seems able to keep up with him. It drives Wall Street nuts.

    Mr. Musk, 44, tipped his hand on this winning-through-failure strategy last week when he set the launch date for Tesla Motors' widely anticipated Model 3 electric car astonishingly early: July 1, 2017.

    But not really, Mr. Musk explained.

    “Now, will we actually be able to achieve volume production on July 1 next year? Of course not,” he said on Tesla's earnings call. “In order for us to be confident of achieving volume production of Model 3 by late 2017, we actually have to set a date of mid-2017 and really hold people's feet to the fire, internally and externally.”

    Calling his own bluffs

    What makes Mr. Musk's deadline bluffs unusual is that he makes them public and lets investors hold him to account. Take what happened when he dropped his biggest bombshell last week, unveiling what is arguably the most ambitious production timeline in the history of cars. Mr. Musk said he plans to go from making about 50,000 electric cars a year to 500,000 — by 2018.

    That's two years ahead of his previous target, which itself was dismissed by Wall Street as nearly impossible. And 2018? That's “too aggressive, setting up investors for disappointment,” wrote UBS AG analyst Colin Langan in a note to investors.

    Some may even view Mr. Musk's strategy as having less to do with motivation and more to do with financing. Ryan Brinkman of JPMorgan Chase & Co. said the new target may be seen as a “perfect rationale for a large equity capital raise.”

    But Tesla doesn't necessarily need a new justification for raising capital.

    Wall Street was already anticipating such a move after the company took in 400,000 (refundable) deposits, at $1,000 apiece, for the Model 3 — showing a level of demand that was as unexpected as it was unprecedented. If anything, the head-scratching 2018 goal is making investors more nervous about the cash burn, not less.

    “We are all for setting aggressive targets,” wrote Joseph Spak, an analyst at RBC Capital Markets. “However, Tesla is increasingly asking the equity investor to sign up for a complex manufacturing ramp the likes of which we don't believe [has] ever been seen before. This brings both elevated expectations and execution risk.”

    In the more typical expectations game played by publicly traded companies, the 2018 goal just doesn't make sense. Normally, companies prefer to overperform. Instead, Mr. Musk is making the future come early again — only this time, it's Tesla's day of reckoning he's moved up.

    The only way to make real sense of the new deadline is to apply the Musk Doctrine.

    Consider that he might have been running dangerously close to meeting one of his impossible deadlines. If the 2020 goal looked as if it could actually be met, that meant everyone could be working harder, and thus expectations should be moved forward. So that's what Mr. Musk did. He now projects 1 million annual electric car sales by 2020. Try meeting that goal.

    Risky gambit

    The gambit comes with risks. While it ensures a sense of mission among Tesla employees, it runs the risk of burning them out just when the company can afford it least.

    Two of Tesla's top manufacturing executives are leaving before the big Model 3 push, Bloomberg News reported last week. When describing the accelerated timeline for tooling the Model 3, Mr. Musk quipped: “If you can create a human baby in nine months, you can pretty much make a tool in nine months.”

    Gestation never seemed so easy.

    The markets weren't so sanguine. Usually when a company significantly increases its forecast, the stock price goes up. Not this time. After Tesla announced its new target, shares dipped. Analysts cited a new risk of failure in the 2018 deadline, including the extra capital it would require to even attempt it.

    The new forecast, like the original 2020 deadline, seems a farce. But something funny happened on May 5, the day after Mr. Musk moved the goalposts. Even as Tesla's stock declined, analysts and auto enthusiasts almost universally moved their own estimates for Tesla unit sales higher.

    In the same report in which RBC's Mr. Spak warned of “the risk to new investment” and maintained a neutral rating on the stock, he nearly doubled his forecast for Tesla's 2020 sales, to 620,000. That's higher than Mr. Musk's old target — the one most considered impossible.

    This may be the doctrine at work. Even though Tesla's founder is almost certain to fail at his new goals -- and is putting the faith of his investors and car buyers at risk in the process — he also just changed everyone's horizon of expectations. What was once considered an impossibility for Tesla, and for electric cars in general, is now considered the most likely course of events.

    ____________________________________

    This Bloomberg News report appeared on the website of Automotive News, a Detroit-based sister publication of Tire Business.

    Letter
    to the
    Editor

    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Tire Business would love to hear from you. Email your letter to Editor Don Detore at [email protected].

    SIGN UP FOR FREE NEWSLETTERS
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please select at least one newsletter to subscribe.

    Newsletter Center

    Staying current is easy with Tire Business delivered straight to your inbox, free of charge.

    SUBSCRIBE TODAY

    Subscribe to Tire Business

    SUBSCRIBE
    Connect with Us
    • Facebook
    • LinkedIn
    • Twitter
    • RSS

    Our Mission

    Tire Business is an award-winning publication dedicated to providing the latest news, data and insights into the tire and automotive service industries.

    tb-logo
    Reader Services
    • Contact Us
    • About Us
    • Site Map
    • Industry Sites
    • Order Reprints
    • Customer Service: 877-320-1716
    Partner Sites
    • Rubber & Plastics News
    • European Rubber Journal
    • Automotive News
    • Autoweek
    • Plastics News
    • Plastics & Rubber World
    • Plastics News Europe
    • Plastics News China
    • Urethanes Technology
    • LSR World
    RESOURCES
    • Advertise
    • Classified
    • Wholesale Tire Directory
    • Privacy Policy
    • Terms of Service
    • Media Guide
    • Ad Rates/Specs
    • Editorial Calendar
    • Clasified Rates
    • List Rental
    • Digital Edition
    • Ad Choices Ad Choices
    Copyright © 1996-2019. Crain Communications, Inc. All Rights Reserved.
    • News
      • AUTO INDUSTRY
      • BUSINESS/FINANCIAL
      • COMMERCIAL TIRE
      • FACTORY FIXES
      • GOVERNMENT & LAW
      • INTERNATIONAL
      • MOTOR SPORTS
      • NEW PRODUCTS
      • RETAIL TIRES
      • SERVICE ZONE
      • SEMA/AAPEX
      • SMALL BUSINESS
      • TIRE MAKERS
      • SPONSORED CONTENT
    • Opinion
    • Multimedia
      • VIDEOS
      • PHOTOS
      • PODCASTS
    • Events
      • LIVESTREAMS
      • WEBINARS
      • SEMA LIVESTREAMS
    • Data
      • DATA STORE
      • DIRECTORY
    • ADVERTISE
    • Classifieds
    • DIGITAL EDITION