Tesla: Model 3 Production Levels Spook Investors
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What rental and natural-gas headlines open this Money Briefing?
Your Money Briefing. Money and market stories from The Wall Street Journal. I'm J.R. Whalen in New York. For Tesla investors, the number of Model 3 sedans the electric car maker can produce in a month could make or break their investment. We'll look ahead to the numbers in a moment. First, these money headlines. For people looking to rent an apartment, vacancy rates are rising and there are little or no rent increases in many major cities. Rents rose just 2.3% in the second quarter compared to a year earlier. That's the smallest annual increase since the third quarter of 2010. Rental growth was flat in major cities with otherwise strong economies. Cities like Austin, Portland, Seattle, Dallas, and Washington, D.C.
That's due to a large amount of new supply. And while average rents continue to grow, individual landlords cut rents in some markets. In addition, landlords are offering tenants incentives, including as many as three months paying no rent, free parking, credit for ride-sharing services like Uber and Lyft, and Amazon gift cards. And low supplies of natural gas could lead to higher prices this summer as Americans begin to flip on their air conditioning units, boosting demand. Extreme cold in January led to record natural gas consumption and withdrawals from storage extended into April due to unseasonably cool weather. Well, now the amount of energy required to cool buildings in June is on track for its second highest level since 1981.
Stockpiles of natural gas have become depleted after an extended winter this year increased demand for heating homes.
How have rent growth and vacancy trends changed in major U.S. cities?
And booming U.S. exports of gas also have absorbed excess inventories. and analysts say that cheap prices have made it more popular for power generation compared with more expensive sources like coal. This is your Money Briefing from The Wall Street Journal. Welcome back everybody. Tesla investors have a lot to be jittery about with regard to the company and its stock, not the least of which is car production. The company reports second quarter delivery figures for its electric cars the week of July 2nd. That's typically a very closely watched figure as investors try to gauge whether the company can achieve consistency in producing cars. Wall Street Journal heard on the street columnist Charlie Grant is here to discuss.
So, Charlie, the magic number in car production for Tesla and its investors is 5,000 Model 3 sedans in a single week. But that's not something that Tesla has been consistently able to hit.
That's right. 5000 cars a week was a goal that Elon Musk expressed last summer that they would reach by the end of 2017. And I just took a look at my calendar and it looks like we're about halfway through 2018. Yes, we are. So maybe maybe this week is the time. So it's a closely watched figure because there's been some hiccups as Tesla's tried to approach this goal in the past. It's also important because Moody's Investor Service is watching carefully and weighing their credit ratings on Tesla.
Well, yeah, you know, Wall Street is losing patience here. It has signaled to Tesla that, for one, you've got to hit your production goals so you can expect downgrades in the stock.
That's right, yes. And Moody's downgraded Tesla's debt back in March because of production issues. And when they issued that downgrade, they warned that the $5,000 a week hitting this production figure was important to them. So there's a lot at stake here.
You point out in your story that Tesla has a habit of ramping up car production at the end of a quarter. And investors really should not mistake that, as you point out in your column, should not mistake that for a healthy level of assembly line activity.
Right, right. So in the fourth quarter, Tesla produced a third of the total Model 3s in the last week or so of the quarter. And in the first quarter of 2018, it was about a fifth of total production. There are, of course, about 12 weeks in a quarter. So what is important is not just what you achieve at a maximum Hail Mary burst rate, as Elon Musk likes to call it.
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