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Tesla lost $702 million last quarter after drop in Model 3 deliveries

Tesla lost $702 million in the first quarter of 2019, after posting back-to-back profits for the first time ever to finish out 2018, the company announced in an official filing Wednesday. CEO Elon Musk had predicted Tesla would slide back into the red on a February 28th call with the media. Telsa generated $4.5 billion in revenue for the quarter.

The company also announced that it doesn’t expect to turn a profit in the second quarter, either. Musk had previously guessed that Tesla would return to profitability for good starting this quarter. Tesla finished the quarter with $2.2 billion in cash on hand, a decrease of $1.5 billion from the end of 2018 — though $920 million of that was used to pay debt that came due in March. ($768 million of that cash is customer deposits.)

Tesla reiterated that it delivered 63,000 vehicles in the first quarter, which it originally announced at the beginning of the month, which is down from 90,000 in the fourth quarter of 2018. Tesla had previously attributed that decline to the challenge of shifting its focus to delivering the Model 3 in two new markets, Europe and China.

On a call with investors Wednesday afternoon, Musk discussed the difficulty of shipping three cars globally from one factory, which he said impacted the first quarter results. “This is the most difficult logistics problem I’ve ever seen, and I’ve seen some tough ones,” he said. Tesla said Wednesday expects to get back to between 90,000 and 100,000 deliveries in the second quarter of 2019.

The loss is a sign that Tesla is still adjusting after a monster year of growth in 2018. Tesla went from delivering 1,550 Model 3s in 2017 to about 140,000 of them in 2018. The company more than doubled its 2017 output despite suffering through self-inflicted “production hell” and “delivery logistics hell,” and it was rewarded with its first profitable quarters in two years (and only its third and fourth ever).

Ever since posting those profits, questions have loomed over Tesla about whether it has exhausted demand for the Model 3 (as well as the Model S and X) in North America. Some Wall Street analysts are especially skeptical, for a few reasons. Buyers of the company’s cars are no longer eligible for the full $7,500 federal tax credit, meaning Tesla’s cars started the year a little more expensive than they were at the end of 2018. (The company initially cut prices by $2,000 to help offset the tax credit dropping to $3,750, but it has since made many more changes to its pricing and availability across all models.)

Musk disputed this in January, saying that “demand for Model 3 is insanely high. The inhibitor is affordability.” To make inroads on the affordability side, Tesla finally announced on February 28th that it was making the long-promised $35,000 version of the Model 3 available for sale. Instead of achieving that price point through design, manufacturing, and engineering breakthroughs alone, as originally planned, the company announced it was cutting operating expenses by closing most of its stores, laying off workers, and shifting to an online-only sales model.

But Tesla later recapitulated and decided to only close some stores. It now focuses mostly on online sales, but it hasn’t stopped taking them in store or by phone altogether. In the meantime, the $35,000 version of the car announced in February never shipped. Instead, on April 12th, the company said it would take a slightly higher-spec Model 3, use software to limit its features and ultimate range, and sell that version of the car for $35,000. It has finally shipped, but it’s only available for purchase in store or by phone.

The release of Tesla’s quarterly earnings results comes in the midst of a wild month of news for the company. A recap:

It’s also not over yet. Musk and the SEC are due to submit an update to the judge in their case on Thursday. Earlier this month, that judge asked them to “take a breath” and “come back with [their] reasonableness pants on” in hopes of the two sides reaching an agreement.


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