Elon Musk was back where he feels most at home on Thursday night: in front of an adoring crowd of Tesla employees and customers, showing off a new car.
“It’s like Steve Jobs and Apple — it wouldn’t be the same without him,” said one admirer in the crowd, who works for one of Tesla’s suppliers.
Dressed all in black and looking even more relaxed than usual when playing to a home crowd, Mr Musk went on an extended rendition of the electric carmaker’s history before taking credit for what he claimed was its impact on the rest of the automobile industry: forcing companies including General Motors, Ford and Volkswagen to pin their own futures on making electric cars.
“It’s extremely rewarding to see the rest of the industry” following Tesla, he boasted. “It’s great.”
It was almost possible to forget, for a moment, the unpleasant realities that have threatened to crash in on Mr Musk’s sustainable energy idyll in the opening weeks of 2019.
At the start of this week, he was forced to make his case to a New York judge about why he should not be found in contempt of court, after antagonising the Securities and Exchange Commission with his use of Twitter.
On the same day, he reversed course on a shock decision made less than two week before to shut down most of Tesla’s retail stores. The about-turn added to the sense of a company making strategy on the fly as it struggles to find the right balance between lowering prices to reach more customers and making a profit.
Ad libbing from the stage at Tesla’s design centre in Los Angeles on Thursday night, Mr Musk dropped the façade for a moment to recall the extreme stress that both he and the company went through last year as it struggled to iron out manufacturing problems on the Model 3, its first attempt to reach the mass market.
“2018 felt like five years in one — it was really intense,” he said.
But only weeks into 2019, it is already clear that this year has presented Tesla with a challenge that is just as significant: How to reach the goal Mr Musk set for it in its earlier days, of reaching a mass market, without overstretching its finances.
There have already been ominous signs. In January, Mr Musk cut staff so that Tesla could remain profitable, albeit barely — only to say, weeks later, that it would fall back into losses for the first quarter. He announced the closure of Tesla’s stores to save money and leave more scope for cutting prices. But undoing that decision meant reversing some of the price cuts, only days after they had been put in place.
Wall Street is now struggling to understand whether Tesla’s struggles reflect a short-term adjustment, or whether it is facing more intractable problems.
It has the functionality of an SUV but it handles like a sports car
At the start of this year, the $7,500 Federal tax credit that its US customers can claim was halved, with another 50 per cent cut coming midyear. At the same time, Tesla has started shipping to Europe and China, lengthening its delivery times and leaving it facing a lag in sales in the first quarter.
All of this amounts to nothing more than a temporary “air pocket” for the company, said Dan Ives, an analyst at Wedbush. Tesla’s complete line-up of vehicles allow it to attack a broad section of the market, he added.
Yet the obvious struggles the company is going through as it reaches for a wider market have emboldened Mr Musk’s army of critics, wiping 17 per cent from its share price over the past two months. While its $50bn market capitalisation still far exceeds that of Ford, the 245,240 vehicles it sold last year remains a fraction of Ford’s 6m annual deliveries.
Against that background, Thursday’s unveiling of the Model Y looked like a return to business as usual for Mr Musk. He has been a past master of getting his audience to look well into the future, burnishing his personal reputation as a visionary — and deflecting attention from today’s problems.
The Model Y will complete Tesla’s line up and give it an entrant into one of the most popular segments of the market. “It has the functionality of an SUV but it handles like a sports car,” he said.
Once the covers were whipped off, even the appearance of the new car was a shiny reminder some of the challenges Tesla faces in its core business.
Mr Musk’s original intention was to design the car from scratch, using a totally new manufacturing base and fresh styling.
Instead, the car shares about three-quarters of its components with the Model 3, in order to minimise the chances of it running into the “production hell” that dogged the ramp-up of Model 3.
“There’s a strong family resemblance, so the wow factor is not the same,” said Philippe Houchois, auto analyst at Jefferies.
Furthermore, Tesla says the Model Y will not hit the market until the autumn of 2020 — and even then, only the more expensive versions of the vehicle will be available, priced at $47,000-60,000 and able to accelerate from 0-60mph in as little as 3.5 seconds for the Performance model. The Standard Range version — capable of doing 230 miles on a single charge, accelerating to 60mph in 5.9 seconds and priced at $39,000 — will not come until two years from now.
To judge from Mr Musk’s record, even that timetable might need to be taken with a pinch of salt. It is three years since he unveiled Tesla’s Model 3 with a promise to sell a version for $35,000, leading to lines outside Tesla showrooms as prospective customers clamoured to put down refundable deposits to get on the waiting list. Yet it was only last month that Tesla said it was finally gearing up to sell the long-promised car.
After that disappointment, some analysts were ready to give Mr Musk the benefit of the doubt over Thursday’s announcement. The Model Y is coming later than many had hoped, but the Tesla boss at least appears to be giving a more realistic timetable than on his earlier cars, said Mr Ives.