Electric car maker Tesla’s river of red ink continued for the first quarter of 2018, but the losses announced today were less than some analysts expected. The troubled automaker is still bedeviled by an inability to roll out its mid-priced ($35,000) Model 3 at profitable levels, the only path to a sustainable business model. But quarterly losses of $710 million ($4.19/share) were not significantly greater than the $675 million ($4.01/share) loss in the final quarter of 2017.
Investment bears and short sellers have been hammering Tesla for months. CNBC reported hours before the Tesla earnings report to the Securities and Exchange Commission, Tesla shares remain firmly in a bear market ahead of its earnings report. “As investors brace for whatever wild swings will come from the release, one strategist identified key levels to watch.”
The earnings announcement – less dire than many expected – bumped up Tesla’s share price by $1.23/share to $301.15, or 0.41%, according to the Wall Street Journal. CNBC commented, “Tesla posted a narrower-than-expected loss on Wednesday as the electric car maker made gains in Model 3 production in April. While Tesla continued to burn through cash at a much more rapid pace than the previous quarter to hit its production goals, its burn rate was slower than analysts had expected.”
In its narrative accompanying its detailed results, Tesla predictably presented a position spin. “We made significant progress on the Model 3 ramp in the second half of Q1,” the company said, “and the momentum continued into early Q2.” But Tesla acknowledged that it is far short of its production goal of 5,000 per week, a level it has consistently missed during the roll-out of the car that it hopes will make electric vehicles mainstream. Tesla said, “Model 3 is already on the cusp of becoming the best-selling mid-sized premium sedan in the U.S. and our deliveries continue to increase.”
This comes just days after Ford announced it was getting out of the sedan business, and will concentrate on trucks (the F-150 half-ton pickup has been the best-selling vehicle in America for decades), SUVs, and cross-overs. As for being on the “cusp” of the mid-sized EV market, GM’s Chevy Bolt has sold twice as many cars as the Model 3.
Writing on the investment site Seeking Alpha, analyst Anton Whalman said that Tesla Model 3 sales in April (first month of Q2) “bombed.” He commented, “All this incessant Tesla happy talk of being 2,000 a week turned out to be misleading at a minimum. This was similar to the 1,000 a week happy talk on January 3, which also turned out to be a misleading indication for the March quarter (8,180). When will investors stop believing management’s happy talk? You can pretty much take their numbers and discount them 50%, 75% or even 90%-plus. There are still more than twice as many Chevrolet Bolt EV cars on U.S. roads as there are Tesla Model 3s. That won’t change until, perhaps, sometime in July.”
As the EV community continues to push at positive message about their prospects, a new dark cloud has appeared on the business horizon: the price of the metals used in car batteries. MarketWatch reported, “A shortfall in supplies of metals such as cobalt, copper, lithium and nickel is likely to slow down the production of batteries for electric vehicles, Moody’s Investors Service said in a note.”
— Kennedy Maize