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Tesla hit with big loss as car deliveries sputter
NEW YORK, April 25, 2019 (BSS/AFP) – Electric carmaker Tesla on Wednesday
announced a heavy loss in the first quarter as car deliveries sputtered
overseas and a US tax credit that made its prices more attractive was
reduced.
The California-based company reported a loss of $702 million in the first
three months of this year after two consecutive quarters of profit.
Tesla produced about 63,000 Model 3 vehicles in the period, an increase of
three percent from the same quarter a year earlier but fewer than had been
anticipated.
The company attributed its disappointing financial results to Model 3
shipping delays, particularly in Europe and China.
Overall company revenue in the period rose 33 percent to $4.5 billion in a
year-over-year comparison, but fell far short of Wall Street forecasts.
The company’s shares that finished the formal trading day down nearly two
percent to $258.66 were essentially flat in after-market trades that followed
release of the earnings figures.
Tesla’s quarterly loss followed changes to pricing and reversals in the
way the company sells vehicles.
– ‘Running out of steam’ –
In late February Tesla said its Model 3 — heralded as an electric car for
the masses — was available for order online only, at a price of $35,000 with
delivery promised within a month.
The following month it reversed course, saying it would keep many of its
showrooms open — but would need to hike prices to do so.
Then, in April, the carmaker ended internet sales of its cheapest Model 3
sedan in another shift to the company’s retail strategy.
Tesla planned to keep taking online orders for the Standard Plus Model 3,
which starts at $39,500 and became the lowest-price option available to
digital consumers.
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But online customers could no longer order the Model 3 Standard for
$35,000, a long-promised price for a vehicle that has been seen as essential
to CEO Elon Musk’s ambition to disrupt the auto industry.
A challenge to vehicle demand has been the lowering of a US tax credit on
Tesla vehicles to $3,500 from $7,500 previously.
Jessica Caldwell, Edmunds.com executive director of industry analysis,
said there were “many signals that the brand is running out of steam.”
Edmunds research indicated that most of the vehicles Tesla made in the
first quarter were shipped overseas, suggesting US demand was softening,
according to Caldwell.
Nonetheless, Tesla was confident it would get past the financial speed-
bumps and into a smoother road to improved fortune.
Musk contended that demand for Tesla vehicles is solid and vehicle
production numbers would increase in the current quarter.
Tesla vowed to significantly reduce losses this quarter and aimed to
return to profit in the following three months.
The company expected to remain on course to deliver between 360,000 and
400,000 vehicles in total this year, topping 2018 numbers by at least 45
percent.
“If our Gigafactory Shanghai is able to reach volume production early in
Q4 this year, we may be able to produce as many as 500,000 vehicles globally
in 2019,” Musk and freshly-installed chief financial officer Zachary Kirkhorn
said in a letter to investors.
“This is an aggressive schedule, but it is what we are targeting.”
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