Tuesday, 16 October, 2018

Model 3 production issues are burning through Tesla's cash

Elon Musk Elon Musk indicated Tesla will take a question from retail investors during its first-quarter earnings call
Elsie Buchanan | 03 May, 2018, 10:17

One example: Musk said Tesla had a very complex robot created to put fiberglass mats on top of the Model 3's battery packs. Tesla made "significant progress" on increasing production of the Model 3, a mass market vehicle created to propel in the second half of the first quarter, Tesla said in a letter to shareholders.

TSLA stock traded up $1.23 on Wednesday, hitting $301.15.

Tesla said it still plans to build 5,000 units per week in about two months, but qualified that statement by pointing out that "prior experience has demonstrated the difficulty of accurately forecasting specific production rates at specific points in time because of the exponential nature of the ramp".

"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. But it was far short of the 5,000 vehicles per week that Tesla said was needed to achieve profitability. "This is not a certainty but it does appear quite likely in my view", he told those on the call. Margins did drop from 27.4% to 19.7% which should be expected as the lower cost, and lower margin Model 3 starts to weigh in on the product mix. If it falls behind, the company will likely have to continue turning to Wall Street for funding.

Sales of batteries and solar panels clocked in at $410 million, a 92 percent year-over-year jump from the $214 million reported last year.

He elaborated on his point Wednesday, explaining that part of the delay was caused by a robot, which was created to install sound-buffering materials on the Model 3's battery pack.

File-In this April 15, 2018, file photo, an unsold 2018 Model X 100d sits on a Tesla dealer's lot in the south Denver suburb of Littleton, Colo.

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Tesla may be ramping up its production targets for the Model 3, but one of America's favorite methods of getting behind the wheel of a new vehicle is still on the back-burner.

Tesla reported end-of-quarter cash balance of $2.7 billion. Bamco Inc. NY lifted its position in shares of Tesla by 0.6% during the fourth quarter. They set a "buy" rating and a $425.00 price objective for the company.

Management cut 2018 capex projections from more than $3.4 billion to below $3 billion.

As a point of reference, Tesla during the recent December quarter posted revenue of $3.29 billion and a loss of $675 million.

Tesla Inc. has had only two profitable quarters in its almost eight years as a public company. At the end of a year ago the company had a total of $9.5 billion in long-term debt. "As a result Tesla does not require an equity or debt raise this year, apart from standard credit lines", the company said.

As unexciting as all this sounds, Tesla did post a smaller-than-expected quarterly loss and a larger than expected amount of revenue.

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