Model Confusion, Losses and a Distinct Lack of SEX at Tesla

Tesla CEO Elon Musk isn’t getting any. By that we mean profits, as the electric automaker reported a $397 million first-quarter loss yesterday, adding to the red ink spilled in the previous quarter.

While the company’s revenue rose 18.4 percent in Q1 and deliveries climbed 12 percent, spending on Model 3 production more than offset the increase in cash flow. Musk took the loss in stride, playing the long game in a quarterly investors call, and claimed a combination of higher production numbers and lower operating costs will send those gray clouds packing.

Finances aside, the conference call yielded far more interesting topics, including details of the upcoming Model Y. Also, it seems people are becoming confused by Tesla’s naming strategy, and Musk has no one but Ford — and a dirty mind — to blame.

Back in 2014, Musk explained efforts to trademark the Model E name were deep-sixed by Ford, which threatened to sue if Tesla didn’t drop the moniker. Having already created the Model S and X, Musk and a friend joked that “E” would make a great name for the automaker’s third model. The joke — a lineup that spelled “SEX” — stuck. However, when Ford (which plans to roll out its own Model E) intervened, Musk was left looking for new name.

He chose Model 3 because the number is just E backwards, which is awkward at best and confusing for customers. Musk said during yesterday’s conference call that some would-be buyers have avoided purchasing a Model S because they think the Model 3 is just a newer version of the larger sedan.

“It’s a bit confusing because one is a letter and one is a number,” Musk, declining to say how many orders were lost due to the misunderstanding.

The CEO claims Model 3 production remains on schedule for a July start date, with the company’s Fremont, California plant expected to hit a production rate of 5,000 vehicles per week later this year. That number should double some time next year, he added, casting doubt in his previous prediction of hitting the 500,000-vehicle-per-year mark in 2018.

To lay the groundwork for the Model 3’s service needs, Tesla has announced a plan to add 100 mobile repair trucks in the second quarter of this year. Existing service locations are few, meaning Tesla would be overburdened (and impatient customers angered) without an alternate solution. Musk claims 375,000 reservations exist for the Model 3.

“Tesla’s mobile strategy is unique given the direct relationship we have with our customers and because our cars are designed so that most repairs can be done without raising the car on a vehicle lift,” the company said in a financial statement. “Our mobile strategy scales quickly, is capital efficient and lowers cost because proactive service and scheduling more than offset technician drive time to the customer.”

Thinking beyond the Model 3, Musk provided a few clues about the company’s next product — a crossover called the Model Y. (“S3XY” doesn’t sound nearly as cheeky as the intended lineup.) Musk plans to develop a new platform for the Model Y, providing the underpinnings for a next-generation Model S and X. The new model should start production in 2020, he said, adding that it will ditch the traditional 12-volt electrical system.

[Sources: Los Angeles Times; TechCrunch] [Image: Tesla]