Here's Why Tesla Could Have Another Major Sales Miss Headed Its Way

It's always important to set the bar high, but has Tesla Inc. (TSLA) set it a little too high?

The electric carmaker has long come under fire for continually missing on production goals. With the development of the more affordable Model 3 electric car, the manufacturing bottleneck became so bad that Tesla CEO Elon Musk dubbed the period "production hell."

So can Tesla pull itself up by its bootstraps to meet the goals management has set? Or is the company headed for more production misses moving further into 2018?

Tesla has long forecast it could deliver 500,000 vehicles in 2018 and reach 1 million by 2020. Last year, Tesla delivered 100,000 cars in the combined Model S and Model X categories, the first time in the company's 14-year history that deliveries hit the six-figure mark. Tesla said in a shareholder letter last month that it expects Model S and Model X deliveries to again total 100,000 in 2018.

Assuming Tesla can in fact repeat its sales performance for Model S and Model X units this year, it would have to sell 400,000 Model 3s in 2018. At this point in time, that looks highly unlikely.

The company said earlier this year that it planned to target weekly Model 3 production rates of 2,500 by the end of the first quarter this year and 5,000 by the end of the second quarter.

There are 43 weeks left in the year. If Tesla produces 2,500 Model 3 cars per week, that would mean 107,500 total for the rest of this year from March onward. Even if it reaches the 5,000-per-week goal, Tesla could only produce 215,000 Model 3 units for the rest of this year.

"As we shared previously, in order to incorporate our learnings and be capital efficient, we intend to start adding enough capacity to get to a 10,000 unit weekly rate for Model 3 once we have first hit the 5,000 per week milestone," Tesla said in the letter.

That could mean 260,000 Model 3s produced in the back half of 2018. But given Tesla's propensity to miss production goals, even that goal appears statistically far off.

It's important to recognize that Tesla has grown its production and sales recently. The company reported 3,950 total sales in February, up 6.8% from a year earlier. Year to date, Tesla has tallied 7,700 sales total, according to data from Motor Intelligence. Tesla itself doesn't report monthly sales statistics.

In the fourth quarter of 2017, Tesla said it delivered 28,425 Model S and Model X vehicles and 1,542 Model 3 vehicles totaling 29,976 for the three months. Combined Model S and Model X deliveries grew 10% globally from a quarter earlier and 28% from a year earlier at the end of 2017.

But none of the sales growth matters at the end of the day if Tesla can't deliver enough units to manage its growing cash problem. As TheStreet's Francesca Fontana reported, investors may not wait around forever if Tesla can't deliver, especially as more mainstream and more established competitors including Ford Motor Co. (F) and General Motors Co. (GM) enter into the electric vehicle race.

The outlook is gloomy, it seems. Even Tesla itself offered a disclaimer of sorts in the shareholder letter.

"It is important to note that while these are the levels we are focused on hitting and we have plans in place to achieve them, our prior experience on the Model 3 ramp has demonstrated the difficulty of accurately forecasting specific production rates at specific points in time," Tesla wrote.

The Model 3 is supposed to be the vehicle that brings the niche automaker into the mainstream. But unless Musk and his team at Tesla can deliver on their Model 3 promises, the company will continue to burn through cash to no avail.

Tesla stock slipped 1.32% to $330.69 in early trading on Monday, March 5.

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