Tesla's (TSLA 12.06%) first-quarter report raised a few concerns for the company. In this video clip from "3 Minute Stock Updates" on Motley Fool Live, recorded on July 6, Fool.com contributor Toby Bordelon discusses the decreasing production trend that could give investors a reason to question the once-favorable outlook for the EV automaker.
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Toby Bordelon: So that's telling us that, hey, we're up at our capacity constraints, limits right now, at least where we were in Q1, and so if you get a shutdown at one factory, even it's only for a few weeks, there's really no excess capacity in the system anyway, to pick up back slack, you can't do it, you're just, that's it. There is no room to produce more, so they need every little bit they can get.
On the plus side, it looks like they were having a supply issue, not a demand issue. They're selling what they can produce. They're delivering for the most part what they can produce. That's the problem you'd rather have, but it means that building out capacity at the factory in Austin, in Germany, in Shanghai to get that up at the max capacity, that's a critical concern. That's what they need to focus on.
They're also no longer the biggest EV maker in the world. That honor, I believe now goes to China, BYD (BYDDY 2.01%) Motors, based on the old BYD motor, which is backed by Berkshire (BRK.A -0.28%) (BRK.B -0.68%). The latest numbers I've seen they sold more vehicles in the first half than Tesla vehicles.
Other automakers are catching up, introducing new models, getting on track for EV deliveries, so the concern here is if Tesla gets into the situation where they can't deliver, they can't produce what consumers want. Consumers just might not wait, they've got other options that they can go to. In some cases, compelling options.
Competition is starting to catch up. On some other recent news, it isn't great. There's potential signs of management issues. The company announced layoffs, including a couple of hundred engineers from the autonomous driving unit. That's not great because that's a key part of the thesis, getting to that full autonomous spot is, I think, given the current valuation, a key part of your thesis if you're going to invest in this company.
It's reasonable to ask the question. Is Tesla reassessing that, or do they have some concerns there? Elon Musk is also taking a very hard stance on remote work, he doesn't like it. He wants everyone to be in the office, is that going to make things harder to recruit people, when he needs to recruit people.
There's some other stuff out there I won't get into, but you wonder if Musk is a little bit distracted, he's running SpaceX, he's surrounded by Twitter (TWTR). Can he focus on what Tesla needs to do? I think there are some issues.
Bottom line for me, we got Q2 earnings report coming up July 20, they tell us. Tesla needs to answer some questions, I think in this report, and if it doesn't do that satisfactorily, I think there's going to be some investors who might start to doubt the company's ability to deliver on the promises that their evaluation implies and wonder if they should stay invested. So pay attention to this report, if you're a shareholder, this is going to be critical, you want to pay close attention to this.
