Saturday, 17 November, 2018

Tesla Profits: Be Careful What You Wish For

2017 Tesla Model X 2017 Tesla Model XEnlarge
Lindsey Cook | 02 August, 2018, 16:34

Cash from Model 3 sales is key to holding off more borrowing.

Tesla said production was rising and a goal of 6,000 cars per week by the end of August had been set.

Chief Executive Musk is under intense pressure to prove he can deliver consistent production numbers for the new sedan, which has faced a host of manufacturing challenges since previous year. It has faced a host of manufacturing challenges since a year ago. In the previous year, Tesla has come under scrutiny for its factory conditions, vehicle production, treatment of employees, odd cost cutting measures, and CEO Elon Musk's fitful interactions with critics. After a struggle Musk blamed in part on relying too much on automation, the carmaker put off capital expenditures toward doubling that rate until it was achieved.

Tesla expects to product 50,000 Model 3s in the third quarter.

Tesla delivered its 200,000th electric auto - including its more expensive Model S and X vehicles - in July, a threshold which means a $7,500 federal subsidy will remain in place to the end of the year.

Musk previously dismissed speculations that his company would need to raise money to stay afloat, promising back in April that it would be profitable in the third and fourth quarters.

Tesla's second-quarter financials are out, and things are looking OK, but next quarter is when things will get truly interesting.

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And, Q2 figures were still an improvement from the $1.05 billion loss in Q1. "In the second half of 2018, we expect, for the first time in our history, to become both sustainably profitable and cash flow positive". That's substantially less than the 2017 level of $3.4 billion.

Still, Tesla's second-quarter loss more than doubled to a record $717.5 million, or $4.22 per share. Tesla still hasn't made any $35,000 base model cars available. Mr Musk then took the first two questions from two analysts he was harshest with last quarter - Sanford C Bernstein's Toni Sacconaghi and RBC Capital Markets' Joseph Spak - and offered personal apologies.

Peter Bannon, a former semiconductor architecture engineer at Apple turned leader in Tesla's Autopilot department, spoke during Tesla's quarterly earning call about the new hardware in the company's portfolio, Autopilot v3. "I'd like to apologize for you know, being impolite on the prior call", he told Toni Sacconaghi of Bernstein, allowing him to ask the first question.

Just as the flare-up contributed to a smackdown in Tesla's stock in May, Musk's contrite tone this time around contributed to today's real-time rise in prices. Investors on Wall Street, meanwhile, were anticipating revenue to fall somewhere in the $3.791 billion range and a loss of $2.90 per share.

Total revenue rose to US$4 billion from US$2.79 billion.

Tesla stock soared in after-hours trading, climbing briefly to a full 11 percent gain before relaxing to a bit over 9 percent, at $329, up from $300.84 at the close of regular trading hours.

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