Tesla posts first quarter loss as cash burn accelerates

Elon Musk’s Tesla, struggling to ramp up production of its Model 3 sedan, burned through cash at a greater rate than expected.

A Model 3 in a showroom at a Tesla dealership in Chicago. Pic: AFP

Tesla, which has struggled to ramp up production of the Model 3 sedan, burned through cash at a greater rate than analysts expected during the first quarter, intensifying pressure on the Silicon Valley automaker to raise more capital.

Despite the increased spending, chief executive Elon Musk reiterated that Tesla is still on pace to make about 5,000 Model 3s in a single week by about the end of the second quarter and said the company should have a profit, excluding non-cash stock compensation, in the second half.

Tesla’s negative free cash flow during the first quarter widened to about $US1 billion after burning just $US277 million in the final three months of last year, a figure that was unusually low thanks, in part, to delays in spending and customer deposits. That total doesn’t include payments for solar energy systems.

The electric car maker posted a loss attributable to common shareholders of $US710 million, the fifth consecutive quarter of record losses. On a per-share basis, Tesla reported a loss of $US3.35, narrower than the loss of $US3.54 predicted by analysts surveyed by FactSet. A year ago, the company had a loss of $US1.33 a share.

Revenue rose to $US3.41 billion, beating analyst expectations of $US3.28 billion.

Shares of Tesla, down 3.3 per cent in 2018, rose 1 per cent to $US304.38 in after-hours trading.

Production of the Model 3 sedan, which began in July, has bedevilled Mr Musk at the company’s Fremont, California, factory where in recent weeks he has had admitted to relying too much on automation to make the vehicle that was supposed to start at $US35,000 but instead goes for $US49,000 in the US. The lower-priced version, with a shorter battery range, isn’t expected to reach the market until later this year.

The vehicle is part of Mr Musk’s vision of bringing electric cars to the masses and turning Tesla into something more than a luxury car company selling Model S sedans and Model X sport-utility vehicles that average for $US100,000.

His gamble of remaking the automotive landscape, however, is facing a critical make-or-break period as the company struggles with the Model 3. The company has little wiggle room and needs to begin generating cash or else raise more money.

Tesla finished the first quarter with $US2.7 billion in cash on hand, compared with $US3.4 billion at the end of last year. The company raised about $US500 million during the first quarter through a sale of asset-backed securities.

Tesla said last month that total vehicle deliveries, including 8,180 units of the new Model 3 sedan, rose 20 per cent to 29,980. Deliveries of the higher-priced Model S sedan and Model X sport-utility vehicle, however, fell about 13 per cent combined compared with a year ago.

Tesla made 9,766 Model 3s during the first quarter and fell short of its goal of making 2,500 in a single week. In April, it said it reached a rate of 2,000 in a seven-day period that included two days of the second quarter.

Mr Musk had once suggested the company could make as many as 200,000 Model 3s in the second half of last year.

While he had warned in July that the Model 3 ramp up would be hard, Mr Musk has said it has been worse than expected. He has retaken control of production and said earlier this year that he was sleeping sometimes at the factory.

He has directed the factory to work 24 hours, seven days a week and aims to make as many 4,000 Model 3s in a single week this month followed by some additional upgrades to the factory so they can make as many 6,000 a week by the end of June.

He set the goal of making 5,000 a week by the end of the second quarter, a milestone that has twice been delayed.

Mr Musk recently told CBS This Morning that he finally sees a way through the challenges, and he has said on Twitter that he thinks the company will be profitable in the third and fourth quarters.

Dow Jones Newswires