Musk Won’t Matter If Tesla Reaches Production Targets

Tesla Inc. (NASDAQ: TSLA) investors believe that the company’s share price will continue to plunge if founder Elon Musk’s bizarre behavior continues. More likely, if Tesla’s long-term production goal of 500,000 vehicles turns out to be realistic, Musk’s fate is much less critical.

Musk’s value to Tesla has been as inventor and face of the company. Arguably, with the launch of the Model 3, Tesla has gone through most of the stages of a startup. Product evolution will become slower. So will the release of new models and major tech advances. This is not to say inventiveness will disappear, but its results likely will slow, which already has been the case for several quarters.

The actual threat to Tesla for the past year and a half is whether its revenue and profits can outpace its need for new capital. That, in turn, means Tesla’s sales need to go from tens of thousands of vehicles per year to hundreds of thousands. Today, Tesla says it produces nearly 7,000 vehicles per week across all its models. The company’s goal is to reach production of 500,000 a year by 2020, or sooner.

[nativounit]

Auto production is not Musk’s specialty. Among the most important decisions he has made was to appoint a production specialist as Tesla’s auto division chief. The decision takes much of the risk of his role as CEO out of the picture.

Musk wrote yesterday:

Jerome Guillen has been promoted to President, Automotive, reporting directly to me. In his new role, Jerome will oversee all automotive operations and program management, as well as coordinate our extensive automotive supply chain. Jerome has made major contributions and acquired deep knowledge of Tesla’s operations over the past eight years at our company, from being the first Model S Program Manager to managing all vehicle programs, then all vehicle engineering and worldwide sales & service. Recently, Jerome played a critical role in ramping Model 3 production, leading what almost all thought was impossible: creation of an entire high-volume General Assembly line for Model 3 in a matter of weeks. Before coming to Tesla, Jerome was responsible for creating and running the most successful semi truck program in history at Daimler’s Freightliner division.

The appointment does not mean Musk managed his way out of a job. What it does say is if he loses his job, Tesla can continue to operate, and probably run well.

[wallst_email_signup]