CEO rejects ‘boring’ analysts after Tesla burns US$1bil more

SAN FRANCISCO: Elon Musk assured investors that Tesla Inc’s cash-consuming days will be over soon, then grew dismissive of analysts who pressed for answers on how he’ll put this era behind him.

After burning through another US$1bil in the first quarter, Musk said Tesla would generate cash in the second half of the year as it gained traction making the Model 3.

Tesla is resolving production issues that have plagued its cheapest vehicle, and may be able to make 5,000 of the sedans a week in about two months, he said.

An initial rally after Tesla released a letter from its chief executive officer didn’t last, and the shares dropped during a strange and tense conference call.

Musk cut off analysts’ queries about the company’s capital requirements and whether it was retaining Model 3 reservation holders, calling the questions “so dry” and “not cool.” The stock declined further, trading down 4.5% in late trading yesterday.

“The boring questions can also be categorised as the tough ones,” said Dave Sullivan, an analyst at AutoPacific Inc.

“I hope the Tesla fans know how to swim, because without the answers to the tough questions, it looks like Musk is leading them straight into the water.”

The often-colourful Musk unveiled what he portrayed as Tesla’s first mass-market car more than two years ago but has pushed back manufacturing targets several times.

Slow output has limited the amount of money coming in from customers taking delivery and tested Tesla’s balance sheet.

Prospective patrons have showed patience – there are still more than 450,000 reservation holders waiting, and customer deposits keep rising, approaching almost US$1bil as of

March 31.

When Joe Spak, an RBC Capital Markets analyst who rates Tesla the equivalent of a “hold”, asked Musk how many Model 3 reservation holders were actually taking the step to configure their car when invited to do so, a long pause followed.

“We’re going to YouTube,” Musk said, referring to the owner of a channel on the video-streaming service who lobbied the CEO ahead of time for the chance to ask questions on behalf of retail investors.

“Sorry,” Musk said, “these questions are so dry. They’re killing me.”

Tesla’s balance sheet also was a sore subject. While Tesla expressed confidence about the second half of the year, negative free cashflow was more than US$1bil for the third time in the last four quarters. The result was also worse than analysts’ average estimate for cash burn of about US$978mil.

Tesla had US$2.67bil in cash on hand at the end of the first quarter, down from the US$3.37bil at the end of last year. Toni Sacconaghi of Sanford C. Bernstein, who rates the company the equivalent of a “hold”, bore the brunt of Musk’s sharpest words after asking about capital requirements.

“Excuse me. Next. Next,” Musk said to the call operator. “Boring, bonehead questions are not cool. Next?”

Model 3 production probably will pause for about 10 days this quarter, an estimated duration that includes a shutdown last month to address bottlenecks.

While Tesla’s battery module line was the main issue plaguing output for months, that’s been resolved, according to the company. — Bloomberg