2017 was a crucial and tumultuous year for Tesla, the 14-year-old EV maker and energy company run by billionaire entrepreneur Elon Musk.
It could turn out to be the most challenging one in Tesla’s history.
The company entered “production hell” this year with its mass-market electric car the Model 3 and was forced to push back vehicle shipments by at least three months. Meanwhile, the company spent, at times, $1 billion a quarter developing the car and the batteries that power it.
But it was also a year of soaring ambition and significant milestones. Demand for Tesla vehicles remains high. At the same time, the company branched out into new sectors, including absorbing and repositioning the solar division it acquired through SolarCity, launching into the trucking world, and sending grid batteries in record time to places like Puerto Rico and Australia.
We decided to take a look back at the roller coaster year for Tesla, which was marked by a stock price that swung from under $200 to almost $400. The year could be a turning point for the company -- but whether that direction is up or down remains to be seen.
As the ball drops on 2017, all eyes will be on the first quarter of 2018 to see if Tesla can successfully ramp up its Model 3 manufacturing and tap into enough cash to do so.
The Ups
Model 3 arrives
The watershed moment for Tesla this year came in July when the company started the first deliveries of the Model 3. During an evening party at the Fremont factory, surrounded by thousands of Tesla employees, Musk showed off the first 30 Model 3s headed to customers.
While many of those cars went to employees and investors, getting those first Model 3s off of the factory line was a major milestone nevertheless. Musk spent more than a decade envisioning the car as the key to his “master plan” in which electric cars are both affordable and thrilling.
So far, the plan seems to be working. In August, Musk reported 455,000 customers have reservations for the Model 3, and a net gain of roughly 1,800 reservations per day.
When, or if, Tesla delivers those vehicles -- and collects the revenue from them -- the company could earn enough to eventually reach profitability.
If Tesla is able to achieve its goals with the Model 3, it could transform the automotive history. If not, it could crash and burn under the strain of its spending.
Grid-scale batteries
Another big win for Tesla in 2017 was the swift installation of several utility-scale grid battery projects. This month, the company finished installing 100 megawatts of energy storage in South Australia in 100 days. That feat enabled Musk to win a bet he made on Twitter and create the world’s largest grid battery.
At the beginning of the year Tesla also installed a 20-megawatt battery project near Los Angeles for utility Southern California Edison. The utility is using the battery farm to meet spikes in demand following the shutdown of the Aliso Canyon natural-gas reservoir.
Earlier this year, Tesla finished building a 13-megawatt battery project next to a solar farm on the Hawaiian island of Kauai, for utility Kauai Island Utility Cooperative. The utility has so much solar already installed that it badly needed batteries to be able to manage it all.
These big contracts aren’t a huge revenue-driver for Tesla, but they are part of a small and steadily growing business. This also enables Tesla to diversify. If Model 3 car manufacturing continues to be a problem, Tesla could draw in more revenue by expanding its grid division.
Some of the more high-profile battery projects -- like Musk’s pledges to Puerto Rico and Australia -- are also useful for generating buzz. The company has long said it doesn’t advertise to bring in customers. Instead, these types of pledges via Musk’s Twitter feed attract media attention and keep Tesla in the spotlight.
At the same time, chasing too many projects has put a strain Tesla’s battery supplies. Tesla ended up buying batteries from Samsung for the Australia project, instead of using its own made at the Gigafactory.
While these splashy side projects have generally been a win for Tesla and its energy storage customers, they could take away from more consistent sources of revenue.
Capital raises
Many investors supported Musk’s vision for Tesla this year, even backing his unusual request to acquire the money-losing SolarCity.
As a result, Tesla was able to successfully raise significant capital in 2017, which it’s been using for the Model 3 and the Gigafactory. In March, the company raised $1.2 billion from common shares and convertible notes. And in August, Tesla made its first foray into the junk bond market, selling $1.8 billion of eight-year unsecured bonds.
Last month saw another, more alternative, type of capital raise: reservations for the electric Semi truck and the new Roadster.
Tesla is even selling reservations for a thousand “Founder’s Series” Roadsters for $250,000 a pop. If Tesla sells all of those, it would raise more than it did from its IPO back in 2010.
It remains to be seen if Tesla’s ability to raise funds will continue into 2018. The company could certainly need more cash, especially if its manufacturing issues aren’t solved.
The new Roadster
Conjuring up the new Roadster is one of Musk’s most business-savvy ideas of 2017. The car, announced at the very end of the Semi truck launch last month, will be able to help Tesla bring in more sales from a likely much-higher-margin business than the Model 3 or grid batteries.
It also enables Tesla to go back to its base of uber-wealthy early adopters, who have stuck by the company from the beginning. If the car is delayed beyond its due date of 2020 (and most likely it will be), those customers won’t be too surprised and will likely stick it out.
The new Roadster could also be a catalyst for Tesla to push the envelope for battery and electric car technology.
Musk said the Roadster will be the fastest car in the world, capable of accelerating from 0 to 60 miles per hour in 1.9 seconds. At the same time, it will have a 200-kilowatt-hour battery pack, which would give it a 620-mile range. Car companies have long used high-performance electric cars as a way to stretch battery life.
The Downs
Model 3 production hell
Because the Model 3 is such a big deal for Tesla, the car’s early manufacturing issues are a big problem.
As soon as Tesla delivered those first 30 cars to customers this summer, Musk acknowledged that Tesla workers were now officially entering “production hell.”
“It’s going to be where we are for six months, maybe longer,” noted Musk to employees at the launch event. Many of those same employees worked on the Model X, which had its own production issues.
But it wasn’t until November that Tesla had a chance to provide the gory details. During Tesla’s Q3 2017 earnings, the company divulged that there was a production bottleneck at the Gigafactory in the section where battery cells are assembled into packs. As a result, Tesla had only delivered a measly 222 Model 3 cars in the third quarter.
Because of the delays, Tesla’s goal to make 5,000 Model 3 cars per week was pushed from the end of 2017 to late Q1 2018. So Tesla is now at least three months behind schedule.
The timing could be a problem for the soon-to-expire federal electric car tax credits. It is also a problem for Tesla’s goal to make 500,000 cars per year in 2018 (up from probably about 100,000 in 2017).
Increased pressure to get the Model 3s to customers could also affect the quality of these early vehicles. One analyst who took a test drive opined that the Model 3’s fit and finish were subpar.
Stretched thin
The pain of “production hell,” as well as Musk’s pressure-cooker work environment, seem to have taken their toll on Tesla employees this year. It appears to be occurring both at the executive level and on the factory floor.
Tesla lost key personnel in 2017, including both of Musk’s cousins who led SolarCity and key hires in its autopilot division.
The company has also been accused of pushing its workers to their physical limits, and sometimes beyond. An investigation by The Guardian earlier this year can be summed up by one Tesla worker’s quote: “Everything feels like the future but us.”
People aren’t the only thing stretched thin at Tesla this year. Ambitious product road maps mean that some future products feel like half-baked ideas, like the little-discussed Model Y or the solar roof.
Cash is also starting to feel tight, and some predict the company will need another capital raise. Last quarter, Tesla generated its largest quarterly loss in its history.
Cloudy solar future
This year turned out to be a difficult one for the residential solar industry, and it was no different for Tesla’s solar division acquired through SolarCity. Tesla took an even more conservative stance than many of its peers and installations began to dwindle.
As a result, before the end of this year, competitor Sunrun is expected to overtake SolarCity as the top third-party ownership financier for residential solar.
Business changes were made, such as eliminating SolarCity’s door-to-door sales. At the same time, SolarCity’s brand started to disappear this year and the company cut a number of solar job positions, which has caused industry watchers to speculate on whether or not Tesla is committed to its solar business.
Meanwhile, Tesla’s solar roof product has many scratching their heads. While cool to look at, only Tesla employees -- including Musk and CTO JB Straubel -- seem to have had the product installed this year. The company’s factory in Buffalo, New York is supposed to begin making the solar roofs before the end of the year.
High stakes
Tesla has had its shares of highs and lows over the years.
The company struggled to get the first Roadster, the Model S, and the Model X to customers. At one point in 2013, Tesla was in such dire straights that Musk struck a deal to sell it to Google to save the company from going bankrupt.
2017 stands out from these years. The company is so close to achieving its decade-long goal of delivering the Model 3 -- one of the first highly desirable mass-market EVs -- but the stakes are even higher this time around.