Tesla Projects End to Cash-Burning Era With Model 3 Gaining Traction

Tesla Projects End to Cash-Burning Era With Model 3 Gaining Traction

The company reported a loss of $3.35 a share on revenue of $3.41 billion, both better than analysts' average estimates.

Tesla's share price took a major hit Wednesday after CEO Elon Musk decided he didn't want to spend a conference call on the company's earning report dealing with a lot of boring questions from analysts.

The company maintains that the scaling up of production will ensure it returns to profitability during the autumn. "That's our focus right now".

The Tesla shares rose due to less than expected loss on Wednesday as the electric auto maker made more revenues in its Model 3 production back in April.

In a letter to investors and shareholders accompanying the report, Tesla Founder and CEO Elon Musk wrote, "Even at this stage of the ramp, Model 3 is already on the cusp of becoming the best-selling mid-sized premium sedan in the United States, and our deliveries continue to increase". He then allowed multiple questions from a person via YouTube.

The earnings report started optimistically enough, with Elon Musk forecasting an end to Tesla's cash-burning days after blazing through another $1 billion last quarter. This is a change from their previous plan to build the vehicle on the Model 3 platform in order to bring it to market faster.

Tesla's balance sheet was also a sore subject. He clarified that it certainly won't be assembled at the plant in Fremont since there's no free production capacity available, saying the factory is "crazy packed" and "jammed to the gills" at the moment. Strong sales of the auto are key to generating cash to pay operating expenses, fund capital spending and make upcoming debt payments.

Tesla CEO, Elon Musk has confirmed that the company's next vehicle, the Tesla Model Y, won't go into production until early 2020.

"This is primarily based on our ability to reach Model 3 production volume of 5,000 units per week", the company stated.

In addition to the Model 3 production ramp, Tesla will drive profits this year by reorganizing, restructuring and cutting out third-party contractors, Musk said. Interestingly, Model 3 is the first vehicle from Tesla to be launched in the Indian market. We are going to conduct a reorganisation, restructuring of the company this month and make sure we are well set up to achieve that goal.

"We have temporarily dialed back automation and introduced certain semi-automated or manual processes while we work to eventually have full automation take back over", the company said.

Tesla has released its financial results for the first quarter of 2018, where the company recorded its highest ever quarterly loss ever at US$784.6 million, which exceeds the US$675.4 million loss experienced in Q4 2017.

To get to that point, Tesla will have to - and already has - spend a lot of money, which is a major concern for investors and one of the reasons why short-sellers have targeted the stock so aggressively. Furthermore, he added that Tesla will have to raise a finance of about $2 billion-$3 billion again by March 19, 2019, when the last tranche of debt would have to be cleared. Last year, during the same quarter, the loss stood at $330.3 million. Analysts polled by FactSet expected an adjusted loss of $3.54 per share.

Shares dropped more than 7 percent in premarket trading.

"I'm feeling quite confident about hitting positive cash flow in Q3". In the future, all Gigafactories will include vehicle production.

Related Articles