Home
Transportation
Transportation News
Tesla Posts Another Loss as the Beleaguered Automaker Seeks to Increase Production

Tesla Posts Another Loss as the Beleaguered Automaker Seeks to Increase Production

By Drew Harwell, The Washington Post | Updated: 2 August 2018 12:01 IST

Tesla said Wednesday that it had burned less cash than expected during the second quarter and was nearing profitability, a long-doubted goal for the beleaguered automaker racing to boost production of its all-electric cars.

The automaker said that it had made $4 billion (roughly Rs. 27,200 crores) in car, battery and leasing revenue during the second quarter of the year, a sharp increase over the same quarter last year because it had finally introduced its newest Model 3 sedan. The stock climbed about 4 percent in after-hours trading.

Tesla's second-quarter losses of $743 million (roughly Rs. 5,000 crores) were lower than analysts' estimates, of about $900 million. But its cash burn extended a money-losing streak for chief executive Elon Musk during one of the company's most challenging years in history.

The results marked a critical moment for a $50 billion (roughly Rs. 3.4 lakh crores) company long believed to be on the brink. It was the last financial update before the second half of the year, when Musk had vowed the company would be profitable.

"It took 15 years to execute on our initial goal to produce an affordable, long-range electric vehicle that can also be highly profitable," Musk wrote in a shareholder letter Wednesday. "In the second half of 2018, we expect, for the first time in our history, to become both sustainably profitable and cash flow positive."

Musk tweeted in April that the company's profitability would mean it would have "no need to raise money," but the company currently has billions of dollars in debt, including more than $1 billion that will need to be paid or refinanced within the next year.

The earnings announcement and a following call with investment analysts have been widely anticipated by both Tesla boosters and critics for signs of Tesla's performance - and for how the outspoken Musk would react. In May, during the company's first-quarter earnings call, Musk berated analysts for asking what he said were "boring, bonehead" questions.

But Musk proved far more subdued during Wednesday's call, apologising to analysts he had clashed with during the last call for being "impolite." "No excuse for bad manners," Musk said, adding that at the time he was working overly long hours on "no sleep."

Tesla is America's youngest major automaker and has at times been valued more than General Motors and the other Detroit auto giants it has pledged to distrupt. But it is also the most heavily shorted company on Wall Street, with an army of investors betting billions that the cash-burning company's turbulence would ensure its imminent collapse.

The company's cash reserves have dropped to $2.2 billion (roughly Rs. 15,000 crores), down from $3.3 billion at the end of last year. In June, Musk said the company would reduce costs by laying off 9 percent of its workforce. Tesla's stock has fallen more than 18 percent since its June peak.

Musk reiterated that the company would "not be raising any equity at any point." "Are we running low on money? The answer is no," Musk said.

Tesla clinched a long-delayed milestone in late June when it announced it had built more than 5,000 of its Model 3 sedans in a week - a pace Musk has said would quickly shepherd the company into profitability. In celebrating that goal, Musk upped the ante, saying the company would produce 6,000 a week by the end of August.

Tesla said Wednesday that its lone car-making factory in Fremont, Calif., had made 5,000 Model 3 sedans a week multiple times during July and should be able to continue at that rate through the third quarter.

"We aim to increase production to 10,000 Model 3s per week as fast as we can," Musk wrote in the Wednesday letter, though he offered no estimated timeline. "It's fair to say that no production ramp of any other product has been as closely watched and debated as that of Model 3."

The company has struggled to deliver the Model 3, which critics have celebrated as a "modern marvel," at a price cheap enough to win over new buyers who have been priced out of Tesla's luxury line. Though promised as a $35,000 mass-market car, the only models available now sell for about $50,000 or more.

Tesla also faces broader challenges that could make its cars more difficult to sell. The company's sale of its 200,000th vehicle last month triggered the phase-out period for a $7,500-per-car federal tax credit granted by the Obama administration to encourage the sale of electric cars. That credit will be halved for Tesla buyers next year and dwindle down to zero in the following months.

Musk himself has garnered headlines in recent months for all the wrong reasons, including after calling a hero of the Thai cave rescue a "pedo." Musk later apologised.

The rocky results Wednesday will probably encourage Tesla sceptics who have criticised the company as underdelivering on its promise of reshaping the auto industry. In a letter Tuesday to clients, billionaire hedge-fund manager David Einhorn criticised Tesla's manufacturing sprint and questioned "whether customers will be happy with the quality of a car rushed through production to prove a point to short sellers."

Einhorn, a short-seller who had bet against Tesla's stock, also said he would not renew his own lease on a Model S, blaming touchscreen and window problems. Musk responded to the news on Twitter early Wednesday by saying he would send Einhorn "a box of short shorts to comfort him through this difficult time."

Comments

For the latest tech news and reviews, follow Gadgets 360 on X, Facebook, WhatsApp, Threads and Google News. For the latest videos on gadgets and tech, subscribe to our YouTube channel. If you want to know everything about top influencers, follow our in-house Who'sThat360 on Instagram and YouTube.