When it comes to thoughts of Tesla and Elon Musk on Twitter and in the real world, there’s not a lot of middle ground.

Musk is either a once-in-a-generation genius who has bested the auto industry and will help humanity escape fossil fuels and slip the bonds of our planet (at $4,000 per share). Or he’s a sociopathic liar who commits fraud and stock manipulation on a daily basis. 

2018 had enough real victories and setbacks to confirm almost any Tesla bias you might have.  

Tesla 2018 victories

2018 production numbers: Last week, Tesla released its record fourth-quarter 2018 figures with 90,700 cars delivered and 86,555 cars built. That’s 8 percent better than the previous quarter, although below Street estimates and a bit shy of the target of 5,000 Model 3s per week. 

Tesla delivered 63,150 Model 3s in the quarter, up 13 percent, while building 61,394 of the smaller Tesla EV. Tesla produced 25,161 Model S and X vehicles, in line with its target run rate of about 100,000 per year.  

Tesla delivered a total of 245,240 vehicles in 2018: 145,846 Model 3s and 99,394 units of Model S and X, delivering almost as many vehicles in 2018 as it had in all prior years combined.

Over the past year, Tesla has tripled its annual delivery run rate from about 120,000 vehicles to more than 350,000 vehicles per year, according to the firm.

Surviving: Go back 10 years and Tesla was just one of many aspiring American electric and hybrid automobile startups. All of them are defunct or dissipated: American Electric Vehicle, Aptera, Commuter Cars, Fisker, Next Autoworks, Think, Venture Vehicles, et al.

Recall the many American auto marques that have faded into history. With corporate lifetimes ranging from 20 years to more than a century, they are all memories: Plymouth, Packard, Stutz, DeSoto, Studebaker, Hudson, AMC, Duesenberg, Pontiac, Oldsmobile, et al.

So far, Tesla is a survivor that seems to be winning on a number of fronts. 

According to Automotive Newsthe Model S outsold the range-topping sedans from Mercedes, BMW and Audi in their European home markets in the first 10 months of 2018. Tesla’s Model S had sales of 13,209 in Europe, according to Jato Dynamics, while the No. 2 seller was the S class with sales of 12,688, followed by the BMW 7 series with volume of 8,221 units.

Tesla owns almost half of the U.S. plug-in EV market, and a decent portion of global revenue for plug-in EVs, according to Inside EVs

Share price: While most other global automakers slumped in 2018, Tesla shares were up over the course of the year. 

American jobs: Tesla has more than 45,000 employees. It had 2,000 employees in 2012. Is there a single American manufacturing firm that has created more decent jobs than Tesla in the last decade? The cars are designed and assembled in the United States — so why isn’t Donald Trump celebrating this American manufacturing success? 

Big, important grid batteries: Tesla has potentially won a contract from California utility PG&E for a massive 182.5-megawatt/730-megawatt-hour battery that will replace gas peakers and save ratepayers money. The current record-holder for the biggest battery is Tesla’s 100-megawatt system in Australia.

A brand and a mission: It’s evident that Tesla has captured the hearts and imaginations of a growing affluent consumer base that shows up in-person to volunteer for the company or online to defend the company’s honor. 

This is unprecedented territory for an American car company — with Tesla exposing inefficiencies and blind spots in the auto industry and eating the incumbents’ lunch in 2018.

Tesla 2018 setbacks

The demand cliff: There is another side to those strong Q4 numbers. In the thesis of the short-seller community, summarized by Polixenes on Twitter, U.S. Model 3 backlog was exhausted in the fourth quarter. That earlier backlog is for “a car that doesn’t exist — a $35,000 Model 3 with a full $7,500 tax credit.”  

Q4 2018 will serve as the peak for Tesla revenues, deliveries and GAAP profit, according to many of the shorts, and Q1 2019 will be a disappointment — but we’ll cover that viewpoint in tomorrow’s 2019 Tesla outlook. 

Musk’s self-inflicted Twitter injuries: The soon-to-be-installed, SEC-mandated “Twitter sitter” is tasked with averting future drama/fraud such as the $420 incident, the “pedo” outburst and other unforced online errors

The taking-the-company-private tweet from August of last year continues to haunt Musk. Just when he thought he was out — with $40 million in SEC fines and changes to the board — Grimes pulls him back in. Musk’s lawyers are trying to prevent Grimes, his romantic partner at the time of the tweet, and Azealia Banks from testifying about the incident, according to Bloomberg

The defamation case resulting from Musk’s July tweet, accusing a British cave diver of being a pedophile, is also back in the news, while Musk resorts to the “just kidding” defense in this sordid affair. 

These and other instances of Twitter malpractice are unnecessary distractions for the CEO of a $50 billion public firm. 

Corporate governance and the SEC: The SEC settlement for Musk’s fraudulent going-private tweet resulted in a new board chair, Robyn Denholm, as well as two new directors — including the questionably independent Oracle chairman Larry Ellison. If Tesla acts in accordance with the SEC settlement, a committee advised by a securities attorney will monitor Musk’s online efforts. Still, Musk couldn't resist taking a swipe at the SEC in a recent 60 Minutes interview.

Surely Musk can muster the discipline not to poke the SEC bear any further.  

Tesla executive departures: There’s no real benchmark for staff turnover at a high-pressure, maximum-growth automotive company with a brilliant and mercurial CEO. That said, Tesla has shed so many senior executives as to be remarkable. Here’s a spreadsheet listing the personnel lost

Vehicle quality: There is a deluge of anecdotal evidence that Model 3 (and Model S and Model X) production is plagued by quality issues ranging from panel gap tolerances, to paint quality, to customer service. One would hope that these problem cars are from early in Tesla’s production experience, and that build quality improves with volume. One would also hope that Tesla has the appropriate warranty reserve to cover these potential defects.

(There is plenty of anecdotal evidence of fine build quality and enormously satisfied customers, as well.)

Solar roof tiles and solar panels: Back in October 2016, GTM warned of the pitfalls of integrated solar roof tiles after Musk unveiled the product on the set of a TV show. Experts calculated the potential costs of a solar-shingled roof. Now, two years later and after having received deposits from interested homeowners, Tesla has connected just a dozen or so solar integrated roofs to the grid — despite Musk’s claim that there were “several hundred homes with solar roofs,” according to reporting from CNBC and Reuters. 

Cynics have suggested that the goal of this product was not grid decarbonization, but rather cover for the $2.6 billion SolarCity acquisition/rescue. 

According to data from Wood Mackenzie Power & Renewables, Tesla’s residential solar installation market share has dropped from 33.5 percent a few years ago to 9.1 percent, allowing Sunrun to become the market leader. Sunrun’s direct business installed 163 megawatts in the first three quarters of 2018, while SolarCity installed 156 megawatts. 

Musk expects a profitable Q4

We'll learn the details on margins, profits and cash flow at the year-end earnings report in a month or so. Despite the profitable Q3, Tesla has been unprofitable over the first nine months of 2018, and cash flow is still a concern.

Model 3 production has stabilized at just shy of 5,000 units per week with healthy margins. Ground-breaking has begun at the Shanghai Gigafactory, and Musk might still eke out a profitable quarter.

Many are wondering how this company could perform if it had better operational discipline.


We’ll cover Tesla’s 2019 outlook, including EU deliveries, China factories, Model Y rollout, Q1 projections, demand cliffs and more, in tomorrow’s follow-up.