Tesla lost $976M in 2018 despite 4Q profit

Keith Laing
The Detroit News
Tesla was expected to bring it close $7.1  billion in revenue in the fourth quarter of 2018 after the company posted a rare a quarterly profit of nearly $312 million in the third quarter of last year.

Tesla Inc. lost $976 million last year despite a $139 million profit in the final quarter of the year, as the Silicon Valley automaker continues to search for consistent profitability. 

The company Wednesday reported a $139 million profit for the fourth quarter of 2018 on revenue of $7.2 billion, delivering a second consecutive quarter of profitability. That number was overshadowed by losing nearly a billion dollars for the year, although Tesla's loses for 2018 were down from a $1.9-billion loss in 2017 

Tesla said its cash position increased by $753 million in the fourth quarter of 2018, improving to $4.3 billion.

The Silicon Valley automaker attributed its back-to-back profitable quarters to sales of its Model 3 sedan, which has a starting sticker price of about $35,000 and was previously plagued by production problems. 

The company said it sold 140,000 Model 3s in the fourth quarter of 2018, and it expects to build 7,000 of the vehicles per week by the end of 2019. 

CEO Elon Musk said in call with investors that Tesla is in position to deliver profitable results going forward. 

"Last year was definitely the most challenging year in Tesla history, but also the most successful," he said. "When considering battery-electric vehicles, Tesla achieved an 80-percent market share of U.S. sales in the last year I think. This point is perhaps not well-appreciated. All other electric vehicles combined were 20 percent of sales in the U.S... so that's not bad." 

Musk said he is optimistic about Tesla remaining in the black going forward now that the company has turned a corner with Model 3 production. 

"Even if there's a global recession, we're expecting deliveries this year to be about 50 percent higher than last year," he said. "Could be a lot more than that, but even with tough economic times to achieve 50 percent growth is pretty nutty. 

"I'm optimistic about being profitable in Q1," Musk continued. "Not by a lot, but I'm optimistic about being profitable in Q1 and for all quarters going forward. 

Tesla reported its results after markets closed. Its shares were trading down 4.7 percent in after-hours trading Wednesday evening at about $294 per share.

Analysts said Tesla is having a hard time converting its reputation as a cutting-edge automotive tech company into financial results. 

"Tesla’s fourth-quarter and full-year 2018 financial results illustrate the steep financial challenges the company faces. And also the conundrum that is the Tesla brand," Michelle Krebs, senior analyst for Autotrader, said. 

"At the end of the day, it’s the two realities of Tesla that many analysts struggle with: A company that continues to be a darling among luxury shoppers and an absolute laggard in financial measure."

Tesla has taken steps to bring its finances in line, cutting 7 percent of its workforce in January after it cut 9 percent in June 2018. The cuts resulted in 6,750 workers losing their jobs. 

Tesla is also battling the loss of its $7,500 federal tax cut that it has defray costs of its electric cars. The company hit the 200,000 electric vehicle credits per manufacturer limit in 2018, triggering a reduction of its credits by half every six months until it hits zero.

Karl Brauer, executive publisher of Autotrader and Kelley Blue Book, said Tesla appears to be moving toward a more traditional business model for the automotive industry with its recent restructuring moves. He noted that in addition to laying off workers, Tesla has cut prices in a bid to increase sales, and reduced the numbers of colors and trims it offers for its cars. 

"For most of Tesla’s history, it prided itself on 'breaking the rules' while avoiding traditional industry policies," Brauer said. "That approach contributed to Tesla’s image as a disruptor, but over the past year we’ve seen the company take a far more conventional approach to vehicle production and pricing.

"All of these moves point to Tesla transitioning from a start-up tech company to a full-fledged, volume automaker desperately seeking sustainable sales and profitability." 

Musk announced on Wednesday's call that the company's CFO, Deepak Ahuja, is retiring. Musk said Deepak, who worked at Tesla for 11 years, is going to continue to serve as a senior advisor to the company.

Musk said Ahuja will be replaced by Zach Kirkhorn, who is currently Tesla's vice president of finance. 


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Twitter: @Keith_Laing