Bob's Gutsy Leadership Blog

Tesla: Time for Adult Supervision?

Tesla Motors has been all over the financial news recently, and usually not for positive reasons. Here are three fundamental problems they are having:

1.) Unreliable Sales Forecasts – Tesla has a long history of over-promising and under-delivering. The latest example comes from their forecasts of 2016 sales. In Q3 of 2015, they predicted the company would deliver between 83,200 to 93,600 cars in 2016. In Q4 of 2015, they lowered that estimate to 80,000 to 90,000 deliveries.   At the start of Q3 of 2016, the company lowered the guidance to 79,200 deliveries. The final result for 2016 was the delivery of 76,230 cars. Net, financial and auto industry analysts were consistently disappointed. Unfortunately, since such disappointments seem to be happening every year, resulting in very low confidence in any number coming from the company

2.) Unrealistic Production Estimates – In March of 2016, Tesla announced it would be launching a new model, called Model 3, that would sell for $35,000 and production would start in mid-2017. Recently it delayed start of delivery to October, 2017 and it forecasted that from October, 2017 through 2018, it will deliver 500,000 units. This number really raised eyebrows, since Tesla just finished 2016 with 76,230 deliveries! Bluntly, there is no way that between Oct. 2017 and December of 208 they will be delivering 500,000 units of a car they have yet to ever try producing.

3.) Questionable Costs Estimates – Tesla has reported that 400,000 people have put down a $1,000 deposit for the Model 3 which Tesla claims will sell for $35,000. Auto industry analyst Tom Spiegel doesn’t believe Tesla can produce the Model 3 for less than $48,000 per unit.  Car and Driver magazine is also highly skeptical, reminding people of the mysterious and often present factor Car and Driver refers to as “Uncontrolled Chaos Multiplier.”

Stepping back, there is no doubt that the Tesla cars are impressive. On the other hand, why subject the company to all the exaggerations and hype, leading to disappointment, and hence, a loss of confidence that anyone is really in control. A core issue here is the founder and CEO, who is a great visionary, but always overly optimistic.   Clearly that is not who you want in charge of the daily, detailed operations and the communication of the business facts and forecasts.  As the leader of long term strategy, the Founder/current CEO would be terrific, but Tesla badly needs some adult supervision to operate the company.

A fundamental attribute of strong leadership is getting the right people in the right job. The board of directors of Tesla should give this some serious thought.

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