Tesla cheaper Model 3 on track, Musk predicts Q2 profit
ELON Musk is delivering on one big promise – a $35 000 (R495 000) Model 3 – while falling short on another: that Tesla’s days of losing money are over.
Musk this week said that Tesla would probably not post a profit in the first quarter, contradicting several of his past predictions that the company would earn money from now on.
He made the comments while announcing the long-awaited cheaper Model 3, with a plan to trim costs by closing stores and cutting more jobs.
“Given that there was just a lot happening in Q1, and we’re taking a lot of one-time charges and there are a lot of challenges getting cars to China and Europe, we do not expect to be profitable in Q1. But we do think that profitability in Q2 is likely.”
Shifting to online-only ordering will enable Tesla to lower the prices of all its vehicles by an average of about 6 percent, according to a blog post. That would help Musk to deliver the model almost three years after the company started taking orders for the car.
Musk said Tesla would also be “significantly reducing” its spending on sales and marketing, which will help make the announced price changes possible.
He said some jobs would be cut and some employees would transition to different parts of the company.
“Tesla pioneered direct-to-consumer sales, and the stores were always more of an advertising portal than an actual transaction portal,” said Mike Ramsey, an automotive consultant with researcher Gartner.
The company would wind down many of its stores over the next few months, Musk said. Some of the 130 outlets would remain in high-traffic locations as galleries, showcases and information centres, and others would become service and repair centres. “There’s no other way for us to achieve the savings required,” Musk said.
Musk reiterated that improving service last year was Tesla’s top priority and said the company would add jobs worldwide to address what has become one of the biggest concerns of new customers. He said moving away from stores would be “incredibly helpful” in boosting deliveries.
“In many parts of the US, we are unable to sell effectively because of franchise laws,” he said. “Now anybody can buy the car online anywhere in the US, immediately. This substantially opens up our ability to sell the cars.”
Three days ago, the US Securities and Exchange Commission asked a federal judge to hold him in contempt of a settlement reached last year over a tweet in which he said the company would make as many as half a million cars.