Tesla says loss will be its last
Tesla says its investors’ long wait may soon be over.
The electric-auto maker reported another big loss in this year’s second quarter on Wednesday — $742.7 million. While it marked an improvement from the record $784.6 million that Tesla lost during the first quarter, it still represented a sobering 85 percent jump from the Palo Alto company’s loss during the same period last year.
But after nearly a year of struggling to ramp up production of the company’s latest car, the Model 3, Tesla insisted Wednesday that the output of its Fremont factory had finally reached a level that would make the upstart automaker “sustainably profitable” for the first time.
Founded in 2003, Tesla has had only two profitable quarters, and not in a row. But with combined production of all three of its current
car models — the fullsize Model S sedan, the smaller Model 3 and the Model X SUV — finally topping 7,000 vehicles per week, the company forecast that it will record profits for the rest of 2018.
CEO Elon Musk has for months predicted that Tesla would reach profitability in this year’s third quarter, and the company recently cut 9 percent of its workforce to help reach that goal. Some analysts have remained skeptical.
But in a conference call Wednesday, Musk said the company would be able to record profits and have positive cash flow “every quarter, from here on out.”
“There may be occasional quarters where we pay back a big loan or something,” Musk told financial analysts on the call. “Absent that, we’ll be cash-flow positive.”
He also apologized for his combative performance during Tesla’s prior earnings call, when he chastised and cut off analysts for asking “boring, bonehead” questions. On Wednesday, he attributed his comments to working 100 to 120 hours per week on the Model 3 ramp.
“There’s no excuse for bad manners,” he said.
Tesla stock rose nearly 9 percent in after-hours trading, following the release of the earnings report, to top $327.
At the end of June, Tesla finally hit a longdelayed target of making 5,000 Model 3s per week, after an all-out push that even included building an extra production line in a tent behind the factory.
While critics questioned whether that level could be sustained, Wednesday’s shareholder letter said that the company had hit that level “several times” in July and expected to reach 6,000 per week by late August. At the same time, the factory is building about 2,000 Model S sedans and Model X SUVs per week.
“It’s an amazing jump from only a year ago, (when) we were producing 2,000 vehicles per week,” Musk said. He attributed the improvement to “many, many late nights, weekends, effort and smart ideas.”
The company predicts that Model 3 production for the third quarter would reach 50,000 to 55,000 cars, up from 28,578 in the second quarter.
Although the Fremont factory has run out of room, Tesla recently unveiled long-expected plans for a second auto plant, to be located in Shanghai.
On Wednesday, the company said it expected the new factory, funded “through local debt,” to start building cars in three years, starting with 250,000 vehicles per year and doubling that rate over time. As part of an escalating trade war with the U.S., China has increased its tariff on imported cars to 40 percent, the company reported, adding impetus for the new factory. Musk on Wednesday gave a rough cost estimate of $2 billion for the new factory.
With Tesla largely focused on the Model 3, the company’s solar business, formerly known as SolarCity, continued to languish. The company installed enough new solar arrays during the second quarter to generate 84 megawatts of electricity, down from 176 megawatts during the same period last year. But installations of the company’s battery storage systems more than doubled, reaching 203 megawatt-hours.