Monday, 10 December, 2018

Tesla Sees Model 3 Production Rate Improving by Q2 2018

Bloomberg Open this
Theresa Hayes | 09 February, 2018, 07:13

Shares of the Palo Alto, California-based company were barely changed in extended trading.

Tesla's adjusted fourth-quarter loss of $3.04 per share was ahead of Wall Street's estimated loss of $3.15 per share, according to analysts polled by FactSet. It's not exactly Musk's vision of an "alien dreadnought" factory spitting out ideal cars in the dark, but the CEO says he has been impressed with how quickly people have been able to learn the skills needed to speed up production.

Except Tesla is only selling the long-range single-motor Model 3 at the moment, with all reservation holders who would like to opt for the cheaper version having to wait until the company is ready to roll them out as well. Also this year the amount of capital invested in the new model would be a bit more than expected.

The company has struggled to keep up with is production targets for the Model 3 but said it would probably build about 2,500 Model 3s per week by the end of the first quarter and that it plans to reach its goal of 5,000 vehicles per week by the end of the second quarter. Difficulties in battery production coupled with glitches in the Model 3 assembly process have slowed down the output.

Tesla spent $787 million in capital expenditures in the fourth quarter, below its projections, but said capital spending in 2018 would be "slightly more" than in 2017 due to expanded production at its Fremont factory and Nevada Gigafactory. The company told analysts in a briefing call that it is set to make some capital investments towards the end of the year towards the next EV in the series, the Model Y.

Finally, Tesla says in 2018 it will demonstrate the profitability of affordable electric vehicles, aiming for an impressive 25% gross margin for the Model 3 after production stabilizes at 5,000.

Annually, billions of dollars worth of Tesla Model 3's are sold.

Tesla's non-GAAP loss per share widened significantly year over year to a loss of $0.69 in Q4.

Tesla is still far from being in the clear with regards to cash.

Tesla had originally planned to build Model Y on the same platform as Model 3 to bring it to the market faster. "I expect to remain CEO for the foreseeable future", he said.

Separately, Tesla former president of global sales and service, Jon McNeill, announced his departure following the earnings call in order to join Lyft as the chief operating officer. The crossover sales are growing faster than sedans in the U.S., which represents a huge opportunity for Tesla's Model Y. The California company now makes two sedans - Model S and Model 3 - and an SUV called Model X. "This project is already generating substantial benefit by meeting high summer demand when supply is limited and by instantaneously responding to unplanned interruptions or frequency drops in the grid", Tesla wrote.

Tesla CEO Elon Musk managed to send his Tesla Roadster into space - because why not? - earlier this week, and it looks like his week (and Tesla's) is still looking up for now following the company's fourth-quarter results.

But some analysts have questioned whether Musk's myriad of other interests, from space exploration to tunnel boring technology, are a distraction at a critical time within Tesla.

Automotive gross margin, which excludes the sale of zero emission vehicle (ZEV) credits, fell to 13.8 percent from 22.2 percent previous year, below the 15.7 percent margins expected by analysts, according to FactSet. The company reported $675 million in losses attributable to shareholders in Q4, wrapping up 2017 with nearly $2 billion in losses for the whole year.

First, revenue was about what analysts expected, at $3.3 billion for the quarter, but that wasn't much of an increase over the third quarter's $2.9 billion. They expect $-3.75 earnings per share, down 200.00% or $2.50 from last year's $-1.25 per share.

Daniel Sparks owns shares of Tesla.