Tesla's tumultuous year has analysts and industry pundits speculating about a possible end game for the 16-year-old electric vehicle manufacturer, ranging from a distressed sale of the company to a soaring, China-led rebound.
Why it matters: Even once-bullish investors have turned decidedly sour on the company lately amid slowing demand for cars like the Model 3 and cash flow warnings from CEO Elon Musk. The next 6 to 12 months will be critical in determining the eventual outcome.
Driving the news: Tesla has always been a roller coaster and generated divergent views among investors. What's new is a greater wariness about the company's long-term future.
- It's not just Tesla stock (down 38% this year) — Tesla bonds are trading lower while the cost of insuring its debt against default is surging, too.
- A $2.7 billion capital raise in May bought the company some time, but Musk warned in a May 16 email to employees that Tesla has only 10 months to achieve breakeven status and called for "hard core" cost cuts.
- Meanwhile, Wall Street is questioning the underlying demand for Tesla products now that federal tax subsidies have expired. Musk, for his part, says Tesla can still achieve record sales this quarter.
What's next: Predicting the future at Tesla is always difficult — and the company declined to comment — but here are some plausible scenarios.
1. China to the rescue: EV sales in China are through the roof, thanks to government mandates, which makes it a perfect market for Tesla.
- A new Tesla factory near Shanghai could begin production as early as August, helping the company avoid higher tariffs on U.S. imports.
- But, the brewing trade war between the U.S. and China could limit Tesla's upside in China. Plus, should Tesla default on its loans, Chinese interests could wind up with a bigger stake. (To be sure, in the current climate, the U.S. government would likely stop that from happening.)
2. Distressed fire sale: Some analysts have weighed the possibility of a buyout by another automaker or tech company, but most say Tesla is still too expensive. Plus, any buyer would likely insist Musk leave the company, but that's hard to envision.
"Tesla is Elon. And Elon is Tesla" — Brian Johnson, automotive analyst, Barclays
3. Licensing its technology: Tesla's lithium-ion battery pack and related power electronics in the Model 3 are the envy of the industry, but it's struggled to master vehicle manufacturing.
- Instead of trying to build its own cars, it could license its premium EV technology and software capabilities to other manufacturers.
4. Or ... Tesla delivers. Musk has a way of defying skeptics, and the company may well manage to muddle through — again.