Musk rails back at critics as Tesla posts losses
CEO rails against the media for reports on layoffs, says the automaker has delivered a quarter of a million vehicles
PALO ALTO » Electric car maker Tesla barely beat Wall Street’s revenue expectations for the third quarter of this year, pulling in $2.98 billion, while reporting a delay in production of its entry-level sedan and posting a loss far worse than analysts had forecast.
Tesla is one of the most closely watched tech companies in the Bay Area, where its zero-emissions vehicles resonate with environmental sensibilities and where Musk is widely admired as a visionary. But with that attention has come a great deal of scrutiny, and criticism over labor issues in its plant, along with customer complaints about materials and workmanship, and frequent production delays with all of its vehicles.
Tesla CEO Elon Musk on Wednesday downplayed the delay for the Model 3, and he railed at media reports about job cuts at the company.
Musk also announced his firm had hit a milestone, delivering a quarter million vehicles to date.
“The Tesla fleet has grown by a factor of 100 in five years,” Musk said in a conference call with analysts.
Wall Street had anticipated quarterly revenue for Tesla of $2.93 billion, and a $496 million loss.
Tesla on Wednesday announced a much higher loss of $619.4 million.
Analysts had expected
losses per share would amount to $2.80, but the losses instead were much larger at $3.70 a share.
Musk took aim at media reports that described job losses at Tesla as largescale layoffs, while the company maintains that it shed workers as a result of a routine annual performance review.
“Any journalists who have written articles to this effect should be ashamed of themselves,” Musk said. “Any company in the world
does annual performance reviews.”
Musk said 700 workers had been let go, suggesting they had lost their jobs because of their performance-review results.
Among the employees to be shown the door were some openly supporting unionization at Tesla’s Fremont plant. In a National Labor Relations Board complaint, workers claimed Tesla fired employees for union advocacy.
Musk argued that employees were eliminated because Tesla has very high standards for its workforce. “If they’re not high, we’ll die,” Musk said.
Tesla’s stock had closed down more than 3 percent at $321.08 Wednesday, then plunged 5 percent after hours to $304.80 by 4:58 p.m., following the earnings report.
Analysts were quick to jump on the per-share losses and problems getting the entry-level Model 3 sedan to market.
“Tesla’s earnings missed the mark, especially on an earnings-per-share basis,” said Kelley Blue Book analyst Akshay Anand. “Though Tesla is promising more Model 3 production in 2018, 2017 has been a miss to this point in terms of model production.
“Of note is Tesla specifically pointing to difficulties in producing the battery packs at the Gigafactory for the vehicle. On a brighter note, Model S and Model X demand still seems to be doing well, but the fact remains that Tesla is still burning cash and needs to right the ship with Model 3 in order to succeed.”
The delay in Model 3 production shows that “Tesla is learning what traditional automakers have long known — mass vehicle assembly is complicated and expensive,” said Michelle Krebs, senior analyst at Autotrader.
Tesla had earlier set a target of 5,000 Model 3 cars to be delivered per week by the end of this year, but Musk pushed that farther out, saying the firm would likely reach that point in March.
“The company has a track record of missing targets,” said CFRA analyst Efraim Levy. “You can be off, which Elon has been often in terms of his stretched targets, but it would be a little bit more worrisome if he couldn’t meet the next objective on time.”
Although he delayed that target, Musk said Tesla would nevertheless be producing “thousands” of Model 3s per week by the end of this year.
“I was really depressed about three or four weeks ago,” Musk said. “Now I can see a sort of clear path to sunshine.”
Consumers may lose patience if delays continue, Levy said. “There’s only so many times that you can miss until you get really penalized,” Levy said. “There is competition out there. There will be more choices coming every year.”
Additional delays could even lead Model 3 customers who have put down their $1,000 deposits to get fed up and forfeit the money, Levy said.
Fewer than 300 Model 3s have been delivered to customers, and anyone ordering a Model 3 now will wait up to 18 months for their vehicle, Tesla has said.
This month, Tesla is set to go before the National Labor Relations Board on charges that company supervisors and security guards harassed workers distributing union literature, amid a push to unionize the firm’s Fremont factory. Tesla denies those allegations.
Tesla said Wednesday in its earnings report that the Model 3 “is not difficult to build,” but the level of automation for its manufacturing is much higher than for its Model S or Model X. That means challenges during the early stages of production, Tesla said.
“We continue to make progress resolving early bottlenecks related to these issues, and there remain no fundamental problems with our supply chain or any of our production processes,” Tesla said.
Still, the firm said it was difficult to predict how long the bottlenecks will last or “when new ones will appear.”