Earlier this year, Tesla CEO Elon Musk set a self-imposed deadline at the end of June to get Tesla Model 3 production up to 5,000 cars per week.
As the deadline drew closer, investors all over the world watched the revolutionary automaker with anticipation. After all, Tesla had repeatedly fallen short of its own manufacturing targets in the past – so would they finally be able to meet their production quota?
On Friday, June 29th (just one day away from the deadline), Elon Musk tweeted a photo of Model 3 engines ready for installation, captioning it with a quote from Frank Herbert’s Dune:
In Dune, “spice” is the name of a fictional drug central to the novel’s universe. It provides users a longer life span, greater vitality, heightened awareness, and on the rare occasion the ability to see the future. Baron Vladimir Harkonnen, a major character in Dune, remarks that “he who controls the spice, controls the universe.”
That’s quite a comparison to make! If Tesla’s new Model 3 can grant me psychic visions, I’ll put my name on the waiting list right now.
By comparing his Model 3 engines to science fiction’s most famous miracle drug, Musk shows that he apparently thinks very highly of his new sedan. It also displays how important he believes electric cars will be in the future – and that whoever produces them could eventually have a tight grip on the economy (and society).
Or… he’s just a big fan of science fiction. Maybe it’s a little bit of both.
Either way, the photo did not exactly inspire confidence in some members of the peanut gallery, and Reddit users were happy to contribute to the ongoing Tesla bashing:
On the flipside, many current Tesla investors were pleased with Musk’s tweet. Not only did they now have physical evidence that production was ramping up, but their fearless leader felt confident that they would meet their goal.
And sure enough, with just hours to spare, Tesla managed to produce over 5,000 Model 3 sedans (in one week) by the end of June:
Tesla fanboys (and girls) rejoiced, as this was the first time Tesla was able to produce its “flagship” car at scale.
But was it really a big deal? Is this the moment that will mature Tesla into a real automaker?
Tesla is as much a car manufacturer as it is a cult of personality for its celebrity CEO. Investors who buy shares of Tesla aren’t just buying into the business; they’re also purchasing equity in Elon Musk in many ways.
Tesla has never been about revenue, or earnings, or anything else that is important to most businesses. Since Tesla’s IPO eight years ago, it has risen 2,000 percent in value even though the company is still not profitable.
In fact, its current financials resemble those of General Motors right before they filed for bankruptcy – meaning that even if they can increase production of their state of the art vehicles, they’re still an extremely inefficient company.
So why would it matter if they can crank out several thousand Model 3s a week?
That’d be like slaughtering a whole pig to make half a hot dog, 5,000 times.
Of course, instead of buying into the Elon Musk tweet hysteria and chasing gut reactions from journalists, you could have just watched the market to see what investors thought about the arbitrary, self-imposed deadline:
Meeting the production goal deadline ended up not helping Tesla in the slightest, instead, it led shares to a 10% drop over the following two days of trading.
Journalists also reported that most of the Model 3 sedans weren’t even ready for market. They still needed numerous finishing touches before they could be sold to customers.
It looks like Elon Musk didn’t get quite the reaction he was hoping for.
But if you would’ve ignored the news and just looked at the charts, you would have noticed that Tesla made a “double top”, indicating a trend reversal.
Even without all the drama surrounding this production deadline, Tesla looked like it was going to move downwards (at least for the short-term) anyway. I don’t think it wouldn’t have mattered if they were able to churn out even 10,000 new cars in a week.
So, while Tesla may still have a very bright future ahead, investors have proven over the last few months that playtime is over. If Tesla is going to continue to expand, it has some growing up to do.
Until then, watching the stock’s price movement may be more prudent than scanning the CEO’s clever tweets.