Tesla's Musk again says company is close on Model 3 production
Tesla Inc. CEO Elon Musk vowed Tuesday that his teams would hit Model 3 production targets by the end of June, and he predicted the money-losing Silicon Valley automaker would churn a profit for the first time by the end of the year.
"It's very difficult to become a mass manufacturing car company," he told shareholders gathered Tuesday at the Computer History Museum in Mountain View, Calif. "Ford is the only one that hasn't gone bankrupt. It's super difficult."
Investor patience is wearing thin, thanks to a string of missed targets and Twitter antics by Tesla's founding chairman. That prompted a shareholder to ask why he should trust Musk when he said that the company would likely make 5,000 Model 3 vehicles a week by the end of this month — almost twice the rate estimated by Bloomberg's Model 3 Tracker.
"I do have an issue with time," Musk quipped. "This is something I'm trying to get better at. I'm sort of a naturally optimistic person. I'm trying to recalibrate these estimates. (Hitting a target) pretty much always happens, but not always in the time frame."
A visibly emotional Musk began his portion of the shareholder meeting commending the Tesla team for "accomplishing so much" in an industry that is proving tougher to master than Musk and his investors expected.
He had planned to make the $35,000 Model 3 at a rate of 400,000 a year by now. The company reported in May that prior to a mid-April plant shutdown, it produced more than 2,000 Model 3 vehicles per week for three straight weeks. Musk has said the company wants to make 5,000 Model 3 vehicles per week this summer.
Tesla repeatedly missed production target dates for the Model 3 sedan, conceived and marketed as Tesla's mass-market electric vehicle. The company's Autopilot driver-assistance system has been activated during multiple fatal accidents in Tesla vehicles in the last few months.
This year's meeting came amid a tumultuous time for the Silicon Valley electric vehicle-maker. Shares have plummeted more than 17 percent over the past year, when Tesla's market value nearly eclipsed that of General Motors Co., Detroit's No. 1 automaker. Tesla stock closed down 1.98 percent at $291.13 for the day Tuesday.
Musk has also clashed publicly on Twitter with the news media over what he views as overly negative coverage of his company. Several high-level executives have left the company in recent weeks.
Tesla lost $709.6 million in the first quarter of 2018, more than double what it lost in the same period a year ago, and burned through $745.3 million in the first three months of the year. The results came just more than a month after Musk tweeted an April Fools’ joke saying that his company had gone bankrupt.
Musk said then that in addition to the Model 3 production ramp, the company would drive profits this year by reorganizing, restructuring and cutting out third-party contractors, though he offered no details.
“We’ve got barnacles on barnacles,” Musk said in early May, referring to the abundance of third-party work at Tesla. “There’s going to be a lot of barnacle removal.”
Multiple analysts both covering the automotive industry and Wall Street said then that Tesla's fate rides on the Model 3. That's not lost on Musk, who's admitted to sleeping on the floor of Tesla's Fremont, Calif., factory to smooth production kinks on the Model 3 line.
"If Tesla gets the Model 3 right and builds it with top-tier quality, they will continue to be a force in the market," said Akshay Anand, executive analyst of Kelley Blue Book. "If they don't, the company may be a what-could-have-been story years from now in high school textbooks."
Musk said Tuesday the company is running two production lines for the sedan, and will start a third soon all in effort to ramp production to 5,000 vehicles per week. The company can hit its targets with two lines, he added, and the third line will help the company ramp past that.
If Tesla can figure out the Model 3 production problems, he said, "the biggest competitive strength of Tesla is going to be manufacturing."
Musk and his team also commented briefly on other pieces of the company. He said Autopilot capability and reliability will increase over the next year. The team also teased news of plans for a factory in China and Europe, and said the company would begin production on the Model Y, Tesla semitruck and Tesla Roadster in 2020. The company would also build a compact car within five years.