Tesla loses $336.4M in Q2, expects costs to rise
Tesla Inc. lost $336.4 million in the second quarter, but CEO Elon Musk said the company’s revenue will eclipse operating costs soon.
He just didn’t say when that would happen.
The company lost $43.2 million more than it did in the same period last year, a difference of 14 percent. Through the first half of the year, the Silicon Valley electric-vehicle maker lost $666.7 million, nearly 16 percent more than it lost in the first half of 2016.
Tesla — which has never posted a profit — expects costs to continue to rise through the next quarter because of increased labor and overhead costs as production of the Model 3 sedan revs up.
Musk and Chief Financial Officer Deepak Ahuja said that the Model 3 would already be contributing cash to the company if not for those costs.
In a call with investors Wednesday afternoon, Musk said the company has 455,000 reservations for the the Model 3 sedan, which starts at about $35,000, and Musk said if someone were to order one today, they wouldn’t get the car until late 2018. Tesla delivered the first 30 production models of the car last week.
“This is maybe the best I’ve ever felt about Tesla, to be frank,” Musk said. “Last week stressed the hell out of me, but I really think that this is probably the best I’ve ever felt about the company.”
Tesla’s second-quarter revenue totaled $2.79 billion, more than a billion dollars up from the same period a year ago. Unadjusted earnings per share totaled a loss of $2.04, slightly better than the $2.09 a share loss it posted in the same period a year ago. According to the balance sheet made available Wednesday after the markets closed, Tesla has $26 billion in total assets, and $3.03 billion in cash and cash equivalents at the end of the second quarter.
Musk expects to spend $2 billion through the second half of the year for ramping up production of the Model 3, among other things. Tesla spent $498.5 million on operating expenses in the first half of the year.
The CEO said the company should be on-track to produce 5,000 vehicles per week by the end of 2017, and 10,000 per week by the end of 2018. Those numbers are far higher than anything Tesla has achieved; the company made 51,126 vehicles in the first six months of the year.
Tesla stock was up around 8 percent in after-hours trading at $352 per share.
Most analysts continue to question Tesla’s share value and how close it will come to its production targets.
“It’s our view that nothing about Tesla’s financials or fundamentals right now justifies a price tag of $320 per share,” Clement Thibault, analysts with Investing.com, said in a note. “Not a single fundamental parameter. The company may be selling a few cars, but mostly it’s being powered by dreams.”
David Kudla, chief investment strategist with Mainstay Capital Management in Grand Blanc, said Musk is continuing to tease future profits without concrete examples.
Musk said during a call with investors that the Model 3 would reach 25 percent gross margin at some point around the time the company begins producing 5,000 vehicles per week, but when pressed for specifics on a timeline or exact number of vehicles the company needs to sell to see that profit on a vehicle, Musk balked.
Kudla said, “If it were any other company, that would be baked into their business plan. They just don’t know. They have never built this car, and they have never ramped up production to these levels. Where they’re going is really uncharted territory for Tesla.”
Shares in the Palo Alto, California, company surged nearly 50 percent since the start of the year, and its market cap for a period of time earlier in the year topped volume leaders General Motors Co. and Ford Motor Co. Tesla reported its second-quarter results after the stock market closed.
Kudla said Musk remains a visionary, and the Model 3 roll-out has been superb, but Tesla remains a “story stock. He said the company will run out of money within several months if it continues to burn cash at the current rate.
“At some point that stock price has to face reality, and that’s going to come in the next several months,” Kudla said.
The Model 3 is the first Tesla under $40,000 to travel more than 200 miles on a charge. The third step in Tesla’s so-called “master plan” after the premium Model S sedan and gull-winged Model X SUV, the Model 3 aims to bring the Tesla brand to the heart of the luxury market.
There will be two versions of the Model 3 — a “Standard” version beginning at $35,000 with 220 miles of range, a zero-60 time of 5.6 seconds, and 130 mph top speed. A “Long Range” version, which features a larger battery, starts at $44,000 with a range of 310 miles.
Musk said Wednesday the company will focus next on the semi-truck that he teased earlier this year. He has said a pickup is in the plans, and that a Model Y compact SUV should be on the road around 2020.
Staff writer Henry Payne contributed