Tesla, dark clouds on its future despite the good news on product

Content updates on some models, important achievements in terms of maximum on-board safety,… Tesla seems to have embarked on a good path when it comes to product news, but the financial and business crisis of the brand still led by Elon Musk persists and faces a complicated short-term future as a result of the heavy cash payments it will have to meet in just 145 days.

As we announced a few days ago, Tesla has just announced the launch of a major software content update for its Model S, Model X and Model 3. Likewise, the Model 3 has recently been recognized as the safest model on the market according to the American NHTSA, due to the low probability that its occupants have of suffering injuries in the event of an accident, with the Model S and Model X in second and third place respectively. According to the NHTSA, Tesla tops the podium for safety… among the 50 safest vehicles on the American market.

The Model 3 is the only one of the cars analyzed that has managed to drop below a 6 percent probability of injury in the event of an accident, a result achieved after earning five stars in all categories covered by the crash tests that the NHTSA performs on all vehicles sold in the United States. These results were obtained thanks to the greater availability of space on board the car enabled by the absence of an internal combustion engine (which facilitates the construction of an even more robust and impact-safe structure), to a better weight distribution and, thanks to the positioning of its batteries, to an extremely low centre of gravity.

But the good product news coming from the manufacturer of the world’s most followed electric vehicles stands in sharp contrast with the news regarding the business crisis the brand has been going through in recent months. A crisis that could worsen to the point of jeopardizing the company’s future if it is unable to overcome the heavy cash payments it must face over the next 140 days.

And to the already known and repeated delays in producing and delivering units already paid for in advance to its customers and Musk’s recent forced resignation as chairman of the company, the five critical months that Tesla has ahead are now added, during which the company must meet payments on substantial debts accumulated in its finances.

It must pay 1.5 billion dollars in 5 months

Tesla must pay in the next five months more than 1.5 billion dollars of the 11.5 billion dollars of debt it has accumulated, payments that it must settle in full within just 13 months. Some of these payments are immediate. In just two or three weeks, Musk’s company has to start paying out money, but its first major payment has a real date: 1 March 2019, the date on which the convertible bonds worth 920 million dollars that the company issued with a conversion price set at 360 million dollars will mature.

And if we take into account that the share price is now at just 262.80 euros, it seems unlikely that the investors who once bet on the company will be able to recover their money through the exchange of shares, which means Tesla will be forced to return cash to its investors. And this at a time when the economic situation appears to be becoming more complicated on a global scale, a situation that could lead to a rise in the cost of Tesla’s options when refinancing its debt in the markets.

Unexplained delays in deliveries: fans offer to make them

Hence the importance of the recent efforts made by Tesla to meet the company’s high production ratios and, above all, to speed up the rate of delivery of models to its buyers. Recently, Tesla turned to self-employed workers and private individuals to make car deliveries to its customers. Many of its employees—especially office staff—made deliveries at weekends, but the most surprising development came from the company’s own followers, especially buyers of its models, who selflessly offered to make deliveries to the new customers receiving their cars and to explain in detail how they worked.

The problem came to light when a woman, Megan Gale, discovered that the car she had been waiting for so many months was parked in a lot at the train station in her city while the company inexplicably delayed its delivery due to the serious logistical problems the company is going through. Following the apology that Elon Musk himself gave her via Twitter, numerous followers of the firm offered to deliver the cars and to train and advise new users on how to use their vehicles. Never before in the history of the automotive industry have users become so actively involved as ambassadors for the brand of their dream car, and all without Tesla making any investment in advertising.

A success for Elon Musk, whose situation does not yet seem entirely resolved. Musk has recently been sentenced to pay 20 million dollars (in addition to the 20 million dollars that Tesla must also pay for the same reason) and to step down as chairman of the car company for the next three years due to the false information he released last August in which he proposed excluding Tesla from the New York stock exchange through an ambitious operation to buy up shares held by investors and private individuals. In doing so, Tesla substantially increased the price of its shares and avoided a significant loss of value that would have further compromised its financial situation.

Musk currently remains as CEO of Tesla, although he will have to subject his actions to a Board of Directors that must include two independent directors chosen by the American Securities and Exchange Commission (SEC) to oversee Musk’s decisions at the head of the company. Although the agreement (which included both the financial and administrative penalties) initially seemed firm, the truth is that Musk apparently has not yet signed it.