Hi Auzie, I've been working on a thorough risk factor list.
I noticed you'd started the "Are we biased..." thread based on your concern not to allow your vision to be clouded based on what you described as attachment to the stock. We all know in life nothing is a "sure thing" and companies do go out of business. I'm not sure if you've had this question, but your question made me realize I've sort of had a minor discomfort that I don't know of any single Tesla business risk that could divert it from success over the next 10-15 years. I don't think my vision has been clouded, but is it a red flag I can't come up with such a Tesla melt down risk factor?
I've spent the past day or so compiling my risk factor list... and, still, though there are risk factors that could slow down Tesla's progress, and/or result in a lesser mature Tesla, still, to my mind there's not a single Tesla business risk factor could take out Tesla altogether.
As I see it, only an unlucky collection of these risk factors in combination could rock the core of Tesla. Two of the risk factors I think could serve as "anchors" to such a collection (Elon dying or severely incapacitated, or a natural disaster hitting Fremont very hard). From those "anchors" you can add in a few of the otherwise survivable risk factors and generate a "doomsday" scenario. Fortunately, as I'm sure you are aware, stringing together independent events you multiply the probability of them, so a "doomsday" set is very, very improbable. Then again, not all these events are independent of each other, so they are somewhat more probable than just multiplying their individual probability. Alas, sitting at his IKEA desk at the Fremont factory, Elon could succumb to a massive earthquake that damages the plant to the point of it being shut down for a year or more. Panasonic has either not signed on yet for the GF, or has an out option on further involvement, and they bail on the GF and it turns out Elon's successorship plan led to an ineffective CEO overwhelmed by all this adversity... (as you'll see in the list below, some of these risks can and may already be mitigated).
the only other caveat, I'll just say to be thorough... a global risk event could occur rather than what one would think of as a Tesla specific risk factor, i.e. World War III,...
Okay, putting that aside, my risk factor list is below. They may mean delays, they mean a lesser ultimate Tesla, but I don't see any of them meaning significant 5-10 year market underperformance compared to say the S&P 500.
I've not ranked these risk factors in any order,
Gen III Value to Consumer I think the car can withstand a higher price and sell out Fremont production, but I think it's critical that it be very compelling- for a large percent of people the car they'd definitely pick in that price range. something less could sell out production but would lose momentum in the public's receptivity to EVs and diminish Tesla's brand and good will with the public. Fortunately Elon sounds very confident on this, and obviously they nailed the Model S... very encouraging indicators, but we'll see it when we see it.
Supplier issue in their last annual report Tesla said they have a single source supplier for the vast majority of items relying on a supplier. obvious vulnerability to quality issues or delays.
Lawsuit I see particular concern given Tesla's taking the lead with technologies. It's exciting to think that self-driving cars and a Tesla app store with independent developers offering you nifty new capabilities may be around the corner... but look how people reacted to the fires. Elon himself has said self-driving cars have to be an order of magnitude safer than a driver because of the scrutiny it will face, and while I'm not a tech guy, I suspect if the car is open to apps, it could be open to unauthorized mischief. Add in all the other items any automaker might face a lawsuit on.
Elon's Mission this is not a value judgement about Elon having a mission for Tesla distinct from maximizing shareholder value, but the fact is it is a risk factor to the company's future valuation. the "open source" announcement is well received, but clearly Elon is an independent thinker completely open to unconventional choices. We've all benefitted from this, but there might be a bold move that is not as well received as the patent move.
Product Recall
Unknown we don't know about As Donald Rumsfeld put it, "...there are also unknown unknowns, the ones we don't know we don't know."
Raw Material Costs this risk increases with Tesla expanding it's involvement in the battery business. of course, if the price of oil goes up Tesla benefits.
Relationship with Panasonic there's the issue of their signing on to the Gigafactory, but unless other cell manufacturers take a big leap forward Panasonic will continue to be an external variable in Tesla's fortunes for many years to come.
Long Term Vehicle Production Scale Up let's say Tesla ramps up to 100K model S/X in 2016. Growing 5X to 500K total production is a very large task. they want to maintain their highly regarded level of quality while they hire/train a large number of workers, and dramatically scale up their distribution system, supply chain, and cash flow/inventory management needs. This may be why they talk about Gen III starting late 2016, but 500K volumes in 2020... taking their time to avoid stumbles with the ramp.
International Expansion I think they can manage what they've already got on their plate, but more markets may be tempting (Brazil, Russia, Korea...). More than anything I think it could tap management time dealing with national regulations, setting up service and SuperChargers, and increase the risk of adverse events if they continue stretching around the globe.
Elon plently of fruits and vegetables and no more smashing up McLarens
Successorship Plan Hopefully there's a good one in place if Elon decides to go on to SpaceX or something happens to him. Fortunately, he's recently said that whether he steps down as CEO or not he will be involved with Tesla as long as he is around. there is the precedent at Solar City of him serving as Chairman.
Natural Disaster Earthquake insurance would be nice. that would offer some financial protection, but there's no insurance against lost time if the plant were actually to be severely damaged.
Model X expectation are now very high. Elon sounds confident, and I do think they will turn out a very good product. Nonetheless, if the product is less than excellent, or even if it is excellent but has some clear flaw for critics to seize on I think we are likely to see a fair amount of "Tesla stumbles" articles. just look at the continuation of silly "Tesla beater" articles we get on the i3, i8, and this week some Audi diesel. bet Elon is pushing for a 100/100 from Consumer Reports.
Gigafactory the factory is planned to have cell production larger than all current production around the planet combined. big project, could have delays. Elon's already talked about the stakes of getting the GF and Fremont Gen III production capacity ramp up in sync (though I think he said this while trying to clarify why it's worth braking ground at more than one site for the gigafactory, and, thus, may have overstated the negative consequences of a delay for affect).
