Tesla CEO is bullish in face of huge loss

After a difficult few months that included a recall, a fatal crash and production struggles at its Fremont factory, automaker Tesla on Wednesday reported that its loss in the first quarter nearly doubled from the same period last year, topping $784.6 million.

Yet the company confidently predicted better days ahead.

If Tesla can increase production of its latest car, the Model 3 sedan, to at least 5,000 per week on schedule, the company should be profitable in this year’s third and fourth quarters. Tesla has registered only two profitable quarters in its entire history as a publicly traded company.

“This is not a certainty, but it does appear quite likely in my view,” CEO Elon Musk said Wednesday, in a conference call with Wall Street analysts.

The Model 3 sedan, aimed at middleclass buyers, is the linchpin to Tesla’s plans, but production has struggled since deliveries began in July. Still, in a letter to

“We’re really going to scrub the barnacles on that front. We’ve got barnacles on barnacles.”

Elon Musk, Tesla CEO, on reducing third-party contractors

shareholders on Wednesday, Tesla reported that Model 3 production surpassed 2,000 per week for three straight weeks in March and April, before the company shut down the production line to make improvements.

Tesla warned that more downtime is planned this quarter. But the factory remains on track to build 5,000 Model 3 sedans per week within two months.More than 450,000 people around the world have placed orders for the car, the most basic version of which will sell for $35,000.

Echoing comments he made in recent months, Musk on Wednesday blamed some of the production woes on trying to automate too much of the Model 3 line.

“We did go too far on the automation front and automated some pretty silly things,” he said.

Musk cited as an example an attempt to automate the process of placing fiberglass mats, with the consistency of fluff, on top of the car’s battery pack. The machine, which Musk called “fluffbot,” didn’t always work, and Tesla finally decided the mats themselves weren’t necessary.

“Machines are not good at picking up pieces of fluff,” he said. “Hands are way better at doing that.”

Some steps of building the car and its battery packs are now being handled by workers but will eventually be reautomated, the company said.

Tesla’s surging loss in part reflects the company’s efforts to add staff at its auto plant and crank up battery production at the company’s Nevada Gigafactory. The firstquarter loss, equal to $4.19 per share, compares to a loss of $397.2 million in the first quarter of 2017 and $770.8 million in the final three months of last year.

Musk said both the Gigafactory and the body shop in Fremont can already support building 3,000 Model 3 sedans per week, and the focus now is on improving the production rate within the car’s general assembly line.

“It’s not brain surgery to get these things right,” he said. “It’s a lot of hard work.”

Musk also said the company would undergo a reorganization this month to help ensure that it reaches profitability, a move that would include reducing the use of third-party contractors.

“We’re really going to scrub the barnacles on that front,” Musk said. “We’ve got barnacles on barnacles.”

Tesla’s revenue rose 26.4 percent from the first quarter of 2017, to reach $3.4 billion. The company’s cash balance at the end of the quarter stood at $2.7 billion.

As of 5 p.m. Wednesday, Tesla stock was down 4.5 percent in after-hours trading following the release of the earnings report.

The company’s firstquarter loss could give new ammunition to Tesla bears, who have focused on the automaker’s cash burn. Even many analysts with a favorable view of the company long term have warned that Tesla may need to raise more money this year, a step Musk has repeatedly said isn’t necessary.

“Tesla, guided by founder and CEO Musk, is walking down a familiar, visionary path,” said Investing.com Senior Analyst Clement Thibault, in an email before the earnings release. “That means there’s a large and enthusiastic group of followers, but an apparent inability by the visionary himself to nail the details and succeed at actual execution.”