Is Tesla seeing declining demand for the Model S or not? It depends on who you ask.
John Stoll of The Wall Street Journal reports that, anecdotally, it appears as if demand for Tesla’s Model S is waning. However, Stifel analysts claim it’s the exact opposite, based on what they observed on their recent tour of the automaker’s factory.
Tesla cuts wait time for highest-end Model S
The Wall Street Journal‘s Mike Ramsey reported that Tesla has shortened the wait time for its most expensive P85D model to only 20 days. That’s a lot shorter than the wait time for the company’s other models. The move is undoubtedly aimed at raising revenue by bumping up the average selling price.
Some, like Stoll, are now questioning whether demand for Tesla’s less expensive models remains strong or whether it is beginning to fade. The EV manufacturer’s management already admitted that demand in China, which was supposed to eventually become one-third of their global volume, has been exceptionally weak.
However, on the bright side, Stoll said the Chinese seem to be responding very well to the P85D dual-motor version.
Tesla tour suggests improving demand
In a report dated March 10, Stifel analyst James Albertine gave the highlights of his recent tour of Tesla’s facility. He noted that there isn’t much evidence about how strong demand for the Model S is, but he did say that it “appears to be improving,” without giving a lot of other details on this subject.
One area in which he did say it’s clear that Tesla is showing improvement is supply. This is important because management has emphasized in their last several earnings call that they just couldn’t keep up with demand. Albertine estimates that the EV manufacturer is building about 1,000 cars per week, pushing a 5% to 10% improvement in battery costs—simply by improving the efficiency of the manufacturing process.
Albertine also reported that Tesla has a new paint facility it plans to get up and running by this summer. He said currently the automaker spends about 16 hours to make the quality of the paint on its Model S on par with that of Aston Martin. However, after the new paint facility is up and running, the process will only take about five hours.
Worries about cash burn overblown?
The Stifel analyst also said he thinks all the worries about cash burn at Tesla are just overdone. Management warned on the last earnings call that they will be spending a lot on capital improvements this year. Since then there has been a lot of debate about whether investors should be worried about all that spending.
Albertine isn’t worried though because of the progress he has seen in the automaker’s manufacturing efficiency. The analyst maintained his Buy rating and $400 per share price target.
As of this writing, shares of Tesla Motors were up 2.06% to $194.24 per share.
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