Tesla posts wider than expected loss but says Model 3 production on track
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Tesla said it was on track to begin producing its all-important Model 3 in July, with a rapid expansion planned after that would lift output to 5,000 vehicles a week this year and 10,000 a week before the end of 2018.
However, the US electric carmaker also warned that “even a couple-week shift in timing” as it scales up could put a significant dent in deliveries. And it hinted at a potential downside from loading so much of its most advanced technology into the forthcoming mass-market vehicle, including its latest Autopilot software: that fewer customers may be interested in buying the Model S, its existing high-end vehicle, which has a starting price roughly double that expected for the Model 3.
The comments came as Tesla announced that revenues in its latest quarter, at $2.7bn, had topped Wall Street expectations, thanks to an increase in average sales prices that benefitted from “favorable product mix shift and higher option uptake”. The pro-forma loss for the first quarter, at $1.33 a share, was higher than the 81 cents most analysts had expected as the company continued to spend heavily in preparation the Model 3.
In a letter to investors, Elon Musk, chief executive officer, said that one of the company’s “challenges will be to eliminate any misperception about the differences between Model S and Model 3.” He added: “We have seen a belief among some that Model 3 is the newest and more advanced generation of Model S. This is not correct.” The company would “continue to clearly communicate” the difference between the models, he said.
Tesla enters the run-up to the Model 3 launch with a substantial improvement in its cash flow from recent quarters. Its operating cash outflow in the latest quarter fell to $70m, from $448m i the previous quarter, thanks to higher vehicle deliveries and an increase in the gross profit margin. The company said that, after its latest round of capital raising, it had a record $4bn on hand as it faces the coming launch.
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