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Tesla says on track for profit despite bigger 2Q loss
SAN FRANCISCO, Aug 2, 2018 (BSS/AFP) – Tesla shares revved on Wednesday on
news the electric car maker is on the road to being profitable this year
despite losing more money than analysts expected in the recently ended
quarter.
Tesla shares raced up more than 9 percent to $328.99 in after-market
trades that followed release of earnings figures and a call in which chief
executive Elon Musk patiently fielded questions and expressed regret for
rudely brushing off inquiries from some analysts a quarter earlier.
“I’d like to apologize for being impolite on the last call,” Musk said to
an analyst whose query he had dismissed.
“There really is no excuse for bad manners.”
Musk said a lack of sleep and long work days had darkened his mood that
day.
The Tesla chief had reacted defensively to questions from the news media
and from the financial community, abruptly shutting down questions from
analysts during the company’s May conference call on earnings.
Tesla has faced multiple controversies in recent months, many of them
stemming from comments made by the mercurial Musk.
– Improving production –
The Silicon Valley-based company reported a $717.5 million loss that was
more than twice the $336.4 million it lost in the same quarter a year ago.
Revenues meanwhile jumped 43.5 percent to $4.0 billion.
The company also burned through less cash than many analysts expected.
Tesla said its closely-watched ramp-up of production of the Model 3 has
hit its stride after earlier missing a series of targets.
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Output of the Model 3, the company’s first targeting the middle market and
a major gamble for Musk, met a 5,000 per week benchmark in June and repeated
that pace “multiple times” in July.
Tesla said it is on track to hit 6,000 vehicles per week by late August
and expects to reach 10,000 per week “some time next year.”
Tesla executives said they have started to make a profit on cars, and
predicted the “margin” will grow as the company benefits from hard-won
production-line efficiencies.
The electric car maker announced in June that it would cut nine percent of
its staff in a bid to achieve profitability.
In its earnings statement, Tesla projected that it would reach
profitability in the third quarter and stay profitable in the fourth quarter.
“Going forward, we believe Tesla can achieve sustained quarterly profits,
absent a severe force majeure or economic downturn, while continuing to grow
at a rapid pace,” the company said.
“Our first impression is positive,” said CFRA Research analyst Efraim
Levy.
“We like the more muted tone of the company’s outlook, with the absence of
unnecessary new stretch goals,” Levy said. “Perhaps it reflects a more
cautious Elon Musk.”
– Shanghai bound –
Musk said that Tesla is doing fine on cash and has no plan to raise more
funding. The company did plan to take on local debt in China to pay for a new
gigafactory in Shanghai to produce vehicles and batteries.
“Other than that, I don’t think we need to raise money,” Musk said.
“We are not in any kind of cash shortage at all.”
He hoped to have the location for a gigafactory in Europe determined by
the end of this year.
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Musk also said Tesla was working relentlessly to improve self-driving
hardware and software, with a focus on safety and security. He promised new
capabilities in an upgraded version of the car’s software due out later this
year.
Tesla engineers have been working in “semi-stealth mode” for several years
making a chip optimized for the intense computing requirements of self-
driving technology, according to Musk.
He credited his team with creating one of the world’s most advanced
computers designed specifically for autonomous operation, saying it was
“super kick-ass.”
Visions for the future at Tesla included a pickup truck, a compact SUV,
and a big rig, with the biggest constraint on growth being how fast they can
ramp up production of batteries for vehicles, according to the chief
executive.
“We have some super stuff coming up,” Musk said.
Musk has been at the center of numerous controversies in recent months as
the company has sprinted in an effort to reach ambitious goals.
Earlier this month, Musk apologized for calling British caver Vernon
Unsworth, who helped rescue 12 Thai boys from a cave a “pedo,” short for
pedophile, after Unsworth spoke dismissively of the Tesla chief’s idea for
bringing the boys to safety.
Musk is also embroiled in a legal fight with a former employee whom he
accused of sabotage. The ex-employee, Martin Tripp, has countersued for
defamatory statements.
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