Tesla losses mount, even as CEO Elon Musk plans ambitious growth

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In this Dec. 14, 2016, file photo, Tesla CEO Elon Musk listens as President-elect Donald Trump speaks during a meeting with technology industry leaders at Trump Tower in New York.
In this Dec. 14, 2016, file photo, Tesla CEO Elon Musk listens as President-elect Donald Trump speaks during a meeting with technology industry leaders at Trump Tower in New York. AP Photo/Evan Vucci, File

PALO ALTO >> Tesla CEO Elon Musk pulled back on estimates of Model 3 reservations on Wednesday, even as the company reported stronger than expected results.

The high-tech electric vehicle maker continued to lose money, although it cited growing excitement and profit margins for its vehicles.

Tesla reported a $336 million loss in the second quarter, roughly 15 percent larger than the same period last year, or $2.04 per share. Company revenues for the quarter were $2.79 billion, more than double last year’s second quarter revenues. Adjusted for one-time expenses, Tesla reported a $220 million loss, or $1.33 per share.

The company fared better than analyst predictions.

Market watchers surveyed by Bloomberg estimated a company loss of $450 million, or $2.34 per share, on revenue of $2.5 billion. Excluding certain expenses, analysts estimated losses of about $310 million, or $1.88 per share. Tesla stock jumped nearly 8 percent in after-hours trading.

The electric vehicle maker and clean energy company is building its brand beyond a luxury niche, quadrupling production and introducing new products like its lower-cost Model 3, an electric semi truck, solar roofs and residential and commercial storage.

Musk revised an earlier estimate that the company had more than a half-million Model 3 reservations. The CEO said Wednesday the company has received 518,000 total reservations, but due to cancellations, it has netted 455,000 orders.

Musk said July was one of the company’s best months, but noted the hard work to build more cars, faster.

“What we have ahead of us is an incredibly difficult production ramp,” he told analysts.

Since the handover last week of the first Model 3 sedans to employees, the company said its averaging more than 1,800 net orders every day. Early versions start at $44,000, with a base model coming later this year for $35,000. Musk said Tesla has also seen new interest in the Model S and Model X.

The company delivered the Model 3 to 30 employees. The company hit a tight production deadline, turning out its first, lower-cost cars in July. The company hopes to produce a half-million vehicles at its Fremont plant next year, a goal Musk acknowledged would bring “production hell.”

Deliveries to non-employees will begin in the fourth quarter.

Shipments for the luxury Model S and X stalled in the second quarter, declining 12 percent from the previous three months. The company blamed a shortage of 100 kilowatt hour battery packs. It shipped about 47,100 vehicles in the first half of 2017, still on pace for a record year.

Clement Thibault, senior analyst at Investing.com, noted that the electric vehicle and clean energy company needed outside cash infusions for three of the last four quarters. The company also must master increased customer service demands, including customer support and charging and repair network, he said.

“This of course raises questions about Tesla’s broader ability to scale not just its manufacturing operation, but the entire supporting infrastructure, particularly since Tesla continues to insist it will run all its operations in-house,” Thibault said.

Musk said the company expects to be able to handle a growing customer base. It will triple the number of superchargers by the end of next year, he said. The company is also building a mobile repair fleet, since 80 percent of repairs do not require the car to be put on a lift, he said.

A Tesla could be fixed at an owner’s home or in a parking lot.

“The ideal service is invisible,” Musk said.

Baird Equity Research believes investors will be boosted by the company’s first Model 3 deliveries, new product details and updates on its solar roof. The high-end roofs are designed for aesthetics — high efficiency solar cells are embedded into tiles — and durability.

Musk said the roofs have been installed on his home and the home of chief technical officer JB Straubel.

Contact Louis Hansen at 408-920-5043.



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