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Professor Christian Stadler on Tesla losses – “investors are right to be worried”

Professor Christian Stadler, expert in strategic business management at Warwick Business School, discusses the motoring company Tesla’s record quarterly loss of almost $710m (£523m).

"If Tesla carries on the way it is going it will not survive, I think investors are right to be worried.

"One of the ways out of this is for Tesla to partner with a tier one supplier like Magna, who have experience in the mass production of cars. Magna already works with OEMs like BMW on producing a model for them. It is more efficient and cheaper for the OEMs and gives them some flexibility if demand drops.

"Of course tier ones might not be so well versed in producing electric cars, but this is where Tesla can work with them and form a partnership to overcome any problems. It will take time to find a way to co-operate, especially around any technology secrets leaking, and there are risks, but Tesla has found mass production is more difficult than it anticipated. It has a great product, but its marketing has created a lot of demand that it can't meet, which may well damage its brand in the long term.

"The tier one suppliers don't have a brand or R&D facilities, and I think somebody like Magna would be a good fit for Tesla to get over its production problems. Of course these problems are well documented so Tesla might be at the mercy of the tier one suppliers, which might eat into their profits, but the tier one suppliers need the car brands as well, they will want to make any partnership work - they need each other and electric cars are the future.

"On the one hand I think Tesla would have broken down long ago if it wasn't for Elon Musk driving this great excitement around the brand. He is prepared to take on great risk, and he has already had a near corporate death in 2008 so he is used to this sort of panic about finances.

“But investors are getting more and more worried, the hype is starting to wear off for them and Tesla needs to find solutions quickly."

Ashley Potter

Press and PR Executive

Warwick Business School

Email: Ashley.Potter@wbs.ac.uk

Tel: 024 765 73967