The company faces many issues, from the need for a mass-market car to the production challenges of a new battery factory.
Tesla (TSLA.O) on Wednesday joined General Motors (GM.N) and Ford (F.N.) in being cautious about expanding electric vehicle (E.V.) production capacity, citing economic uncertainties and underscoring fears of a slowdown in demand for cars powered by renewable energy. G.M. said it would delay production by a year of its Chevrolet Silverado and GMC Sierra electric pickup trucks at its plant in Michigan, blaming sluggish sales growth for the decision.
According to analysts, E.V. inventories are growing, and prices are falling as demand cools. That may have contributed to sluggish E.V. sales in the third quarter. Analysts expect the market for E.V.s to continue to grow but not at the same breakneck pace as in previous years.
As a result, major automakers have been slowing their E.V. production and shifting investment toward commercial vehicles and hybrids. Some startups have also seen lower-than-expected results, with Lucid reporting a near 30% plunge in third-quarter production and Amazon-backed Rivian saying it cut its full-year production forecast by 24% due to weaker-than-expected orders for its airy Air luxury sedan.
During the company’s earnings call on Wednesday, Tesla CEO Elon Musk conceded that the new factory in Mexico was taking longer than expected to open, citing a “challenging macroeconomic climate.” He added that he was worried that higher borrowing costs might prevent potential customers from affording its vehicles despite substantial price cuts.
Earlier in the call, Barra said GM would take a different approach than Tesla to focus on high-volume models that are less profitable. She added that the company would produce a range of E.V. nameplates, from the affordable Chevrolet Equinox SUV to the Cadillac Escalade I.Q., costing four times as much.
Investors reacted to the cautious outlook by sending the stock down nearly 4% in after-market trading on Wednesday.
As the world’s largest E.V. maker, Tesla’s problems are having ripple effects. The company is seeking a loan from banks to keep its cash flowing, and it may have to raise more money as it grapples with the fallout of its missteps in manufacturing.
A key issue has been the site of the new factory in a remote part of Mexico’s Nuevo Leon state. The region’s governor says the government still needs to finish constructing roads and railways for Tesla to operate its factory. Moreover, the government may need more money to pay for the construction, which could delay work on the project. If the site isn’t ready when Tesla is ready to begin production, it might have to scout elsewhere for a location. Nevertheless, the company’s chief financial officer, Deepak Ahuja, told investors the project is still on track for 2023 startup. The company has been working to acquire land in the region since March. The project is expected to cost around $4 billion, including the purchase of equipment and infrastructure.