I had an interesting conversation last week that may be of interest to MS owners (I know this is the MS forum, not the Model 3).



A guy came up to me after a local sporting event to which I had driven my car and indicated that he liked its configuration. When I began to extol its virtues, he said "I know, I run the company that makes the XXXXs for all Teslas. We employ XXXX employees in XXXX, and Tesla is our biggest customer."



I asked, "Do you make the same parts for the new Model 3?" He said, "Yes, but not yet in volume." I asked, "What do you know about the ongoing Model 3 delays? I have one on order." He replied (paraphrasing from conversation recall - but close), "It's a big mess. I have to be careful about what I say, but was on a conference call the other day to discuss production issues. Tesla's production lines aren't working and the issue is body welding." He went on to say that Tesla has no one who can run the new robotic welders - they are finding it impossible to regulate and apply the right amount of heat to do high speed welding. He said that while Tesla may have the right robots, making them production-ready is a highly specialized skill set and they don't have it. His company was told to reduce production for the foreseeable future, until further notice, and produce to order, not in high volume. He said that he worries about Tesla's ability to get it together - that the original MS and MX production lines, for which he also makes all of these key parts, was much more plug-and-play, essentially retooling existing lines from the old Toyota/GM joint venture, but that for the Model 3, everything is new, and that Tesla has been naive about what it would take to get it up to speed. He sounded quite pessimistic about whether the Model 3 production can ramp fast enough to generate cash flow.



For obvious reasons I cannot identify the event location, type of part, or the company, but this fellow was quite credible. I knew the company location and name, and he knew too much about the car and Tesla's operations for me question whether he's the real deal. He said couple other things that were personally identifying, and I was able to google him - seems authentic.



I came away more concerned than ever about what we are being told vs. reality. Those of us who care about Tesla's ability to bridge from start-up boutique to viable mass market auto-producer have had good reason to worry recently about over-promising and under-delivering. The whole enterprise has been a bet on getting the Model 3 to mass market production. The volume production hurdles and logistics are looking harder and harder to overcome. Tesla fast-tracked the 3's development and production, eschewing several typical steps in pre-production testing, and bet the farm on building the machine that builds the machine, and that machine isn't working according to this source.



In the Spring of 2013 Tesla nearly went under and Elon negotiated with several potential buyers, but the share price allowed a significant share offer, the debt markets provided some capital, and Tesla was able to do several other major capital transactions in subsequent years that got us to this point. This year and next are supposed to be the infection point that proves the multi-phase master plan for Tesla. The billions of annual cash burn, compared to currently available cash, require a rotation in the next couple quarters to significant Model 3 volume and related revenue. What contingency plans or alternatives might be up Mr. Musk's sleeve?



I know this post reads a bit like a sky-is-falling Seeking Alpha article, given the reference to an unidentified source, and I agree with any criticism you want to make - take it for what it is worth. I wouldn't place much credence on it, but it was an interaction that I know to be real. And no, I am not short TSLA.

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