Tesla registers big 1Q losses but promises profitability in 2019 (Update)
Tesla has announced deceiving financial results for the first quarter of 2019, with fairly big losses. However, it promises to be profitable again in the second half of this year.
702,1 million dollar was the net loss, following two quarters of beneficial figures. The bad result was mainly due to a disappointing production figure, 63.000 cars produced while 76.000 were planned. Turnover grew to 4,54 billion dollar (+33,2%) but the market expected 5,2 billion.
Elon Musk was questioned by investors and had his new financial director, Zachary Kirkhorn, at his side. Despite many questions on the matter, he refused to answer those about his feud with the SEC watchdog.
For the second time in a row the SEC and Elon Musk didn’t come to an agreement and they’ve asked another delay because “discussions were productive”. The SEC watchdog has asked Musk to watch the content of its tweets which can possibly influence investors or the stock market in a whole.
Tesla itself sees the cause for the bad results in the delays in Model 3 delivery in Europe and China. But different price variations of that model have also sown confusion. Furthermore Tesla announced a few months ago closing shops to save money and be able to propose a 35.000 dollar Model 3.
A few weeks later the company announced closing only a few shops and that it would not sell Model 3 online. According to Jessica Caldwell from Edmunds.com Tesla is getting breathless. “Our research indicates that many Tesla models were sold abroad and that interest for the car diminishes.”
This lack of interest is also due to the halving of the federal premium in the US of 7.500 dollar for ‘clean’ cars. This bonus will disappear entirely at the end of the year. Nevertheless, Tesla persists that demand stays solid. Production will increase in the second quarter, Musk declared.
At Tesla they stay optimistic. It has just announced a fourth model, the Model Y as a SUV version of Model 3. “We will be profitable again in the third quarter”, the company has promised.
It’s an optimism fueled by 360.000 and 400.000 cars being delivered in 2019. An increase of 45 to 65% over 2018. Tesla is counting a lot on China and Europe to meet this results.
The company is even more ambitious: “If our Shanghai plant can start producing in 4Q, we will build 500.000 cars in 2019.” The problem is that the plant won’t be able to produce as many Model 3’s as projected by Musk.
The Tesla CEO initially promised 3.000 units a week by the end of the year, now he has revised this to “at least 1.000, probably 2.000”. Musk also announced that in China it will produce batteries together with a new, Chinese partner: Contemporary Amperex Technology.
A thing that can calm investors and the market is also that the company had 2,2 billion in cash at the end of March. It avoids having to appeal again to another round of fund raising. Until now Tesla had the reputation of burning money far too quickly.
Meanwhile there are doubts rising about the CEO’s leadership. As already mentioned Musk announced first a closing of all shops and a price decrease. Somewhat later he said the shops will stay open and there was a (small) price increase.
More importantly, Musk is constantly launching new projects that ask for a lot of money and it’s not clear where that money will come from. Investors have already put at least 20 billion dollar in the company and now they want some return.
Critics say that Musk is still acting like a CEO of a start-up, with ideas going in all directions. His company, on the contrary, has grown up now and asks to be managed likewise. The next months will show if investors are still standing behind the “chief showman”, as Musk has been called recently.