Despite massive losses, Musk says no fears of a Tesla cash crunch
CEO apologizes for testy conference call with analysts
Tesla, fighting to boost production while narrowing its continuing losses, said Wednesday that it lost US$742.7 million in the second quarter, down from the previous quarter but substantially more than in the same quarter a year ago.
But CEO Elon Musk says a focus on profitability will turn things around. He said he is highly confident that Tesla will be cash-flow positive in the second half of the year, a critical issue given the high level of spending that has raised questions about whether it will need to raise more funds.
“Are we running low on money? The answer is no,” he told analysts. Tesla said its cash outflow was $130 million for the quarter, “significantly better” than the $398 million in the first quarter. Its capital expenditures were $610 million.
Musk said there are no plans to sell more shares and that financing for a new factory in China will likely come from loans from local banks.
Investors applauded the news, driving up Tesla shares 14 per cent in Thursday trading.
Musk apologized for being testy with analysts in a previous conference call that raised doubts about the company because of the lack of candour. There’s “really no excuse for bad manners,” Musk said, blaming lack of sleep amid 120-hour work weeks for his eruption as the company announced first-quarter results three months ago.
The automaker said it was able to meet its goal of producing 5,000 Model 3 electric cars per week over several weeks.
Together with its other two models, it hit output levels of 7,000 in the last week of June — and says it isn’t going to stop there.
“We aim to increase production to 10,000 Model 3s per week as fast as we can,” the company said in its letter to investors for the quarter ended June 30.
The company said that even with a total of 7,000 vehicles of all models a week, the level of output “should enable Tesla to become sustainably profitable for the first time in our history.”
For the first six months of the year, Tesla has lost $1.5 billion, which has raised questions about its long-term viability.
While its second-quarter net loss was $742.7 million, the amount attributable to common shareholders was $717.5 million,
or $4.22 a share.
Much of the spending continues to involve ramping up production of the Model 3, Tesla’s first mass-market electric car with a starting price of about $35,000.
In addition, Tesla said it remains on target of delivering 100,000 of its two luxury models.
It said its used car sales are “growing rapidly,” which should reduce losses in its services business.