Cars and Drivers

Tesla Short Interest Falls 2.4 Million Shares

Douglas A. McIntyre

Published: August 10, 2016 8:40 am

Last Updated: January 13, 2020 4:45 am

Shares sold short in Tesla Motors Inc. (NASDAQ: TSLA) fell by 2.4 million for the period that ended July 29, coming in at about 30 million. More important, the company has a huge 24% if is float sold short, a sense of how deeply some investors believe the company will fail.

The gamble represented by the percentage of the float has plenty of support, particularly when it comes to Tesla’s ability to ramp sales, as it has over 400,000 reservations for its inexpensive Model 3. In its most recent letter to shareholders, the company said it lost $293 million. It also said it delivered fewer cars than expected, but that it could deliver 50,000 cars in the second half of the year.

The worries about Tesla fall into two categories, which are related. The first is whether its Gigafactory can get online fast enough to allow the company to deliver 500,000 cars a year before the end of the decade. This is one measure founder Elon Musk has made for the company. It also will be necessary for Tesla to meet the demand for the Model 3.

Tesla also faces growing competition from larger car companies. Recently, BMW began to attack the pace with which Tesla can produce cars. According to Automotive News:

BMW is taking direct aim at Tesla Motors Inc. in new ads for its 330e electric plug-in hybrid. Two new TV spots don’t mention Tesla by name. But the implications are clear that BMW is taking a jab at the startup electric car maker and the fact that the much-hyped Tesla Model 3 won’t be available for a long while.

BMW already has two “mostly electric” models in its i3 and i8. The market will be flooded with new electric car models within the next few years.

Tesla’s auto-pilot feature already has upcoming competition from Google and Apple, along with many of the world’s largest car manufacturers.

Tesla’s shares are down 5% to $229 so far this year. And there are still a lot of investors who expect the figure to go lower.