Three Things That Could Slow Down Tesla

Noah Berger | Bloomberg | Getty Images

Noah Berger | Bloomberg | Getty Images

With the stock up almost 400 percent in the last year and the Model S collecting numerous accolades, not to mention stronger sales, it looks at first glance like nothing can slow down Tesla right now.

But, there are three things that could potentially slow down Tesla.

Production glitches

When we walked into the Tesla plant with CEO Elon Musk in Fremont, Calif., I asked him, “What’s your biggest challenge?”

“The biggest challenge has been supply chain,” he replied without hesitation. “We’ve got about 250 direct suppliers, and if you go one level below that it’s a few thousand suppliers. If any one of those suppliers can’t deliver, we can’t produce cars moving at the same cadence.”

Musk admited Tesla has, at times, had to slow the Model S assembly line. Still, it’s been able to raise production of the electric car to 500 per week.

(Read More: Age of Cars in America Climbs to All-Time High)

The execution risk and challenge will only multiply as the company moves to building 40,000 vehicles annually starting next year.

“We’re making as many cars as we can while keeping quality standards high. So the main focus is actually how do we increase our production rates,” said Musk.

Battery cell supply

As electric vehicle sales grow, so does demand for battery cells that are incorporated into the battery packs that power the Model S and will power all of Tesla’s future models.

As Tesla increases production and moves toward building more than 100,000 vehicles in the next three to four years, Musk knows he will need more battery cells.

“I think battery cell supply for long term production growth is my biggest concern,” he told me as we stood by a silver Model S halfway through the assembly line. “The current lithium-ion production capacity in the world can only support a few hundred thousand cars.”

Tesla is working with battery cell suppliers such as Panasonic and LG Chem to make sure there’s greater supply. Still, Musk said that ensuring there are enough battery cells to meet future demand could require building a massive giga factory to produce them.

“The problem is going to get solved,” he added. And if the world’s battery cell makers won’t build a giga factory, Tesla could play a role in building one.

(Read More: BMW’s New i3 Battery Car Targets Urbanites)

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Musk leaving early?

This is the one potential issue that worries investors who have come to view owning shares of Tesla as essentially making a bet on Elon Musk. He is the visionary who has turned skeptics into believers.

He’s committed to staying at Tesla at least until vehicle production climbs well over 100,000 units. That won’t happen until at least 2016 or 2017, and Musk said he has no plans to leave sooner.

“I think a lot of people think my life is a lot more fun than it is. Not that it isn’t fun, but if you take anyone’s job and say you have to do that job but do it twice in two different industries simultaneously, and you’ve got a bunch of kids, it’s a difficult thing to do,” said Musk

I followed up by asking him if he was tired?

“I’m often tired,” he said.

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—Follow Phil LeBeauon Twitter: @Lebeaucarnews.

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