Tesla expects to become profitable in 2016, shares surge

TESLA MotorsIncChiefExecutive Elon Musk promised investors that the electric luxury car maker will start making money this year, sending the company’s shares up sharply despite a wider fourthquarter loss.

Tesla shares rose more than 10 per cent in after-hours trading after the company forecast a 60 to 80 per cent increase in vehicle sales this year and promised it would turn a profit on an adjusted basis. It will start generating positive cash flow in March.

Tesla shares are still down more than 30 per cent since the beginning of the year, reflecting investor concerns about continued losses.

Musk and the company’s new chief financial officer, Jason Wheeler, sought to assure investors on a conference call on Wednesday evening that Tesla is determined to cut costs, hit production targets and stanch losses. “Cash is king,” Wheeler said. Musk said Tesla would make its first net profit by the fourth quarter. It plans to invest US$1.5 billion to add capacity, start production at a huge battery factory in Nevada and open more showrooms.

Tesla’s cash reserves dropped to US$1.2 billion as of December 31 from US$1.9 billion a year earlier, despite a sale of shares last summer. The company’s cash burn has become a concern for some analysts, given the heavy capital spending it has mapped out. The slower-than-planned launch of the company’s Model X sport utility vehicle during the last quarter added US$67 million in unplanned costs, Tesla said.

“I feel very good about things right now,” Musk said.