Tesla lost $702 million last quarter after drop in Model 3 deliveries
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Tesla lost $702 million in the first quarter of 2019, after posting back-to-back profits for the first time ever to finish out 2018, the company announced in an official filing Wednesday. CEO Elon Musk had predicted Tesla would slide back into the red on a February 28th call with the media.
The company also announced that it doesn’t expect to turn a profit in the second quarter, either. Musk had previously guessed that Tesla would return to profitability for good starting this quarter. Tesla finished the quarter with $2.2 billion in cash on hand, a decrease of $1.5 billion from the end of 2018 — though $920 million of that was used to pay debt that came due in March. ($768 million of that cash is customer deposits.)
The loss is a sign that Tesla is still adjusting after a monster year of growth in 2018. Tesla went from delivering 1,550 Model 3s in 2017 to about 140,000 of them in 2018. The company more than doubled its 2017 output despite suffering through self-inflicted “production hell” and “delivery logistics hell,” and it was rewarded with its first profitable quarters in two years (and only its third and fourth ever).
Ever since posting those profits, questions have loomed over Tesla about whether it has exhausted demand for the Model 3 (as well as the Model S and X) in North America. Some Wall Street analysts are especially skeptical, for a few reasons. Buyers of the company’s cars are no longer eligible for the full $7,500 federal tax credit, meaning Tesla’s cars started the year a little more expensive than they were at the end of 2018. (The company initially cut prices by $2,000 to help offset the tax credit dropping to $3,750, but it has since made many more changes to its pricing and availability across all models.)
Musk disputed this in January, saying that “demand for Model 3 is insanely high. The inhibitor is affordability.” To make inroads on the affordability side, Tesla finally announced on February 28th that it was making the long-promised $35,000 version of the Model 3 available for sale. Instead of achieving that price point through design, manufacturing, and engineering breakthroughs alone, as originally planned, the company announced it was cutting operating expenses by closing most of its stores, laying off workers, and shifting to an online-only sales model.
But Tesla later recapitulated and decided to only close some stores. It now focuses mostly on online sales, but it hasn’t stopped taking them in store or by phone altogether. In the meantime, the $35,000 version of the car announced in February never shipped. Instead, on April 12th, the company said it would take a slightly higher-spec Model 3, use software to limit its features and ultimate range, and sell that version of the car for $35,000. It has finally shipped, but it’s only available for purchase in store or by phone.
The release of Tesla’s quarterly earnings results comes in the midst of a wild month of news for the company. A recap:
- April 3rd — Tesla announced Model 3 deliveries would be down for the quarter as it shifted attention to Europe and China.
- April 4th — Musk appeared at a courthouse in New York City to make arguments about his ongoing case with the Securities and Exchange Commission, which is trying to hold him in contempt of court for allegedly violating the settlement he agreed to last year over the “funding secured” debacle.
- April 8th — Fiat Chrysler Automobiles announced it would pay Tesla “hundreds of millions of euros” to count the electric automaker’s cars as part of the FCA fleet in order to dodge looming European emissions fines.
- April 11th — An apparent spat between Panasonic and Tesla — who are partners in the Gigafactory outside Reno, Nevada — surfaced.
- April 11th — Tesla changed its plans for the $35,000 Model 3. The cheapest version of the car is now only for purchase in store or by phone, and the original goal of making a dedicated battery pack and interior for this variant was killed off.
- April 18th — Tesla short-seller spots the company filming a drive for its upcoming “Autonomy Investor Day.”
- April 20th — Tesla was granted a temporary restraining order on that person, who also allegedly hit a Tesla employee with his car back in February.
- April 21st — A video of a Model S catching fire in a parking garage in China went viral.
- April 22nd — Elon Musk made a bunch of wild predictions at Tesla’s Autonomy Investor Day and showed off its first custom self-driving computer and chip.
- April 24th — Tesla announced a refresh of the Model S and Model X with new drivetrain components that boost the ultimate range of each, with the Model S now topping out at a previously unheard-of 370 miles.
It’s also not over yet. Musk and the SEC are due to submit an update to the judge in their case on Thursday. Earlier this month, that judge asked them to “take a breath” and “come back with [their] reasonableness pants on” in hopes of the two sides reaching an agreement.