Tesla confident it will reach Model 3 production goals
The automaker’s cash position continues to be an issue of debate
With much of its future riding on the success of its Model 3 sedan, Tesla said Wednesday it is still on track to produce 5,000 such cars a week by the end of June.
Tesla gave the update on the Model 3 as part of its first-quarter earnings report, which came out after the close of trading Wednesday. The company also said it produced 2,270 Model 3 cars during the last week of April after shutting production down for a few days to address some assembly line issues. Tesla said it produced 4,750 Model 3 cars during the two weeks prior to its scheduled downtime in April.
“There’s no question, there are ways we could have made the Model 3 production easier,” said Tesla Chief Executive Elon Musk, on a conference call to discuss the company’s first-quarter results. “(But) we’ve had a radical improvement in tackling production. We’re feeling really good about the Tesla Model 3 production ramp.”
The Model 3 is seen as crucial to the success of Tesla as the company tries to expand beyond being viewed as just a maker of high-priced, luxury electric vehicles. Tesla has touted that a version of the Model 3, with a $35,000 initial price tag, will be the company’s first moderately priced car. However, that Model 3, with a shorter battery range, isn’t expected to be on sale until next year, and most Model 3 cars now cost closer to $50,000.
Tesla’s other main vehicles, the Model S and Model X, start around $70,000, and go well above the $100,000 mark when extra amenities and specialized technologies are included in the vehicle.
“I think the Model 3 production level is achievable,” said Efraim Levy, who covers Tesla for CFRA Re-
search. “But, they are still a month behind their (original) goal of 2,500 (Model 3s a week) in March, so they need to ramp up and accelerate.”
In addition to updating its Model 3 production targets, Tesla also gave quarterly results that came in better than had been expected.
Tesla said that for the period ending March 31, it lost $4.19 a share, on revenue
of $3.41 billion. Excluding one-time items, Tesla lost $3.35 a share, while Wall Street analysts had forecast Tesla to lose $3.58 a share, on $3.22 billion in revenue.
The matter of Tesla’s cash position continues to be an issue of debate, as some on Wall Street have speculated that the company could run out of money before it sees significant sales help from the Model 3.
Tesla said it ended the quarter with $2.7 billion in cash, down from $3.37 billion in the fourth quarter
of 2017. Musk said the company is also working on reducing its spending this year and Tesla expects to spend less than $3 billion on capital expenses this year, compared to $3.4 billion in 2017.
“They hope to be in positive cash flow and earnings territory in the third and fourth quarters,” said Clement Thibault, senior analyst with Investing. com. “But it all depends on Tesla achieving its production goal of 5,000 (Model 3) cars weekly. Unfortunately, we’ve heard and seen it all before, and at this point, I’ll believe it when i see it.”
Still, many analysts believe Tesla will have to go to the capital markets this year, or in early 2019, to raise cash to keep its operations going.
“Tesla faces a make-orbreak year,” said Michelle Krebs, executive analyst at Autotrader. “The big questions remain: Will investors step up to put more cash into the company, and can Tesla conquer the Model 3 production challenges.”