Tesla Motors announced a couple of structural and management changes last week with just a few weeks left in the fiscal quarter. Barclays analysts question the timing of these announcements and wonder whether they are a sign that Tesla will miss sales estimates for the March and June quarters.
Tesla shuffles sales department
Tesla Motors Inc (NASDAQ:TSLA) said it had reassigned Jerome Guillen, former global sales and service vice president, to a position that’s focused more on customer satisfaction. The automaker also said it is currently seeking three people to head up sales by region, which will give it a structure that’s more similar to the one used by other international companies.
For now, it can be assumed that the three new sales heads will report directly to CEO Elon Musk, just as Guillen did previously.
Is Tesla still production constrained?
In a report dated March 13, Barclays analyst Brian Johnson questioned why Tesla is making these changes right now. He wonders whether management’s claims that they’re having trouble keeping up with demand are still valid.
He also wonders whether Tesla Motors Inc (NASDAQ:TSLA) will miss March quarter or, more likely in his view, June quarter delivery estimates. If the EV manufacturer does miss delivery estimates, it would suggest that it is demand constrained—as some have argued—rather than production constrained.
Why make a change now?
Tesla management has said they’re targeting 55,000 Model S deliveries this year, and CEO Elon Musk claimed they can do this even without delivering a single car to China. If the automaker can meet this goal and is indeed production constrained rather than demand constrained, Johnson questions why it matters who is running the sales department.
Further, he questions why Tesla would shuffle its sales department in such a way with only three weeks left in the quarter. He said many of the clients he spoke with believe it could be because Tesla is coming up short on March deliveries, which management guided to be 9,500.
He adds that the real issue could be with the pace of booking new Model S orders because Tesla ended 2014 with a backlog of 10,000 orders. Also the automaker has promised a 20-day turnaround on deliveries of the newest model, the P85D dual-motor version. Johnson’s estimate for deliveries for the final three quarters of this year is 35,000 vehicles, which is significantly lower than the 45,500 units that are implied by the March quarter and full year guidance.
Did Tesla management mismatch Guillen’s skills?
Johnson said perhaps the larger question deals with Guillen’s assignment to sales, which he suggests could have been a mismatch of skills. He questions whether Tesla management understands what it takes to be successful in sales, noting that Guillen’s past work experience was as a mechanical engineer. It indeed seems strange to put an engineer in charge of the sales department.
He added that the reassignment to service makes more sense because he sees it as being similar to engineering in a “relatively mechanical, predictable” way that also follows planning strategies that are similar to those used to plan engineering projects. Sales, however, requires an entirely different set of skills.
Shares of Tesla Motors Inc (NASDAQ:TSLA) rose as much as 3.81% to $195.85 per share today after Musk’s tweet that they plan to roll out a software update to put to rest range anxiety, once and for all.
