Tesla assured investors its highly anticipated Model 3 sedan is on track to begin production, mitigating concerns that the car maker led by Elon Musk is burning through more cash to bring the vehicle to market.
The Model 3 remains on schedule for output to start in July, Tesla said as it reported first–quarter earnings results in a letter to shareholders. Excluding some items, Tesla lost about $US1.33 a share, a bigger deficit than analysts estimated. Cash burn was the second most in the company’s history, behind only the final period of last year.
The Model 3 remains on schedule for output to start in July, Tesla said as it reported first-quarter results. Photo: Troy Harvey
Musk, 45, has flagged plans to spend heavily during the first half of this year to bring out Tesla’s most affordable car to date. Keeping the sedan’s arrival on course is essential to support Tesla’s high-flying share price, which vaulted the company’s valuation past the much larger and profitable General Motors and Ford Motor last month.
“All eyes are on the Model 3, and reaffirming the July guidance is great,” said Joe Dennison, associate portfolio manager of Zevenbergen Capital Investments in Seattle. “We’re at an inflection point where we’ll see just how big of a company Tesla may ultimately be.”
Tesla shares fell about 0.7 per cent to $US308.70 as of 5.30pm in New York, after the close of regular trading. Analysts were projecting the Palo Alto, California-based company would report a loss of about 82 US cents a share.
In the first quarter, Tesla burned through about $US622.4 million – about half the amount raised in equity and debt offerings earlier this year. The company expects to roughly triple capital expenditures in the second quarter compared with the first three months of the year.
The rollout of the Model 3 sedan will give an indication of how much the enigmatic Musk learned from mistakes made with the Model X sport utility vehicle. First introduced in late 2015, the vehicle was marred by design changes, parts shortages and build problems.
Tesla has said that the Model 3 is “designed for manufacturing”. Musk took to Twitter in March to call Model 3 “just a smaller, more affordable version of Model S”, with “less range & power & fewer features”.
The Model 3 is expected to start at $US35,000 before options or incentives, with a battery range of at least 215 miles per charge. The first vehicles made will go to employees of Tesla and SpaceX, Musk’s space exploration company.
“Right now it’s all about execution on the Model 3 ramp and proving that they can manufacture in high volumes,” Cole Wilcox, CEO of Longboard Asset Management, said in an interview ahead of the earnings release. “Tesla had a lot of troubles with the Model X, but they’ve simplified the Model 3.”