Tesla missed their 2018 sales target, but does it matter?

January 11, 2019 14

Despite the fact the electric vehicle sales were up by more than 300 percent in California this last quarter, that wasn’t enough to help Tesla exceed its sales target. The company, based in Fremont, reported earlier this week that it had missed its sales estimate by around 1.5 percent, spooking investors who firmly believed that once the firm overcame its production issues, its sales would soar.

Tesla is starting to realize that getting ahead in the automobile industry is no easy feat. The company, which so far has relied on its incredible marketing cache, is now facing the reality that selling cars at volume is not easy. Other companies spend billions of marketing dollars every year, trying to entice people to buy their latest vehicles, even if they’re only a minor upgrade over what came before. Tesla may have to go down the same route if it doesn’t want sales to tank.

On top of the sales issues, investors noted that Silicon Valley automaker still was not able to sustain a production rate above 5,000 units per week – something that the company initially promised would happen by the end of 2017, and then by the summer of 2018. It seems that Tesla’s “production hell” is fast becoming a permanent feature of the company.

There was some good news on the pricing front, despite many buyers losing their $7,500 tax credit in the US on new purchases of Tesla vehicles. The company announced this week that it would be cutting the base price of all its models by around 5 percent. For the Model 3, that’s a drop of more than $2,000.

Tech is driving battery price changes

What exactly is driving these changes is not known for sure, although most analysts suspect that the cost savings are coming from the ever-dipping price of battery technology, driven primarily by economies of scale at the Nevada Gigafactory. Estimates suggest that Tesla is helping to accelerate the pre-existing decline in battery cost. By 2019, we were supposed to have lithium-ion batteries in the $130 per kWh range, but in the summer Musk indicated that he’d managed to get the cost below $100, a saving that could theoretically be passed onto consumers.

We may still see mass consumer adoption

It’s hard to know precisely what Tesla’s market potential is since the carmaker is not yet an established player, still supplying a fraction of the number of vehicles of, say, GM. What could set the company apart is the new technology we’re likely to see in 2019. Automobile accident lawyers say that rear-end crashes and t-bone accidents are some of the most devastating for health, but Tesla may introduce technologies this year that help to make accidents a thing of the past.

According to the Verge, Elon Musk has said that he believes that the company is only a matter of months away from releasing a new AI chip which will deliver improvements in autonomous performance by between 300 and 500 percent. He expects significant breakthroughs, but whether the company will deliver remains to be seen.