With $35k Model 3 Finally Available, Tesla's Musk Warns of a Financial Rough Patch

Steph Willems
by Steph Willems
with 35k model 3 finally available teslas musk warns of a financial rough patch

Is the long-awaited, stripped-down $35,000 Tesla Model 3 profitable? Company CEO Elon Musk won’t say, brushing off the question during a late Thursday conference call.

“Yeah, we’re not going to talk about that. Next question,” said Musk, who last fall warned that releasing the lower-priced car prematurely could sink the company. The nearly three-year wait period for the 220-mile electric sedan saw a constantly evolving end date, though the anticipated March deliveries jibes with Musk’s October prediction of four to six months.

What doesn’t jibe is Musk’s Thursday admittance that, after two profitable quarters, his company will likely sink back into the red.

Less than two months ago, Musk said he was optimistic for a profitable first quarter of 2019, as well as “all quarters going forward.”

That optimism has since dimmed, with Musk telling journalists last night, “Given that there was just a lot happening in Q1, and we’re taking a lot of one-time charges and there are a lot of challenges getting cars to China and Europe, we do not expect to be profitable in Q1.” He added, “But we do think that profitability in Q2 is likely.”

Yesterday also brought news of the automaker’s move to online-only sales, with its retail stores turned into galleries, service centers, or perhaps closed. Again, the potential for job losses was something Musk preferred not to mention.

“That’s not today’s topic,” he said when asked about further layoffs. In a memo sent to employees last night, Musk warned of job cuts in Tesla’s sales and marketing divisions.

As for the public’s desire for a spartan, 220-mile Model 3 available only in black (any other paint shade will set you back at least $1,500), Musk said he wasn’t sure how many customers might spring for one. Spend two nanoseconds on “Tesla Twitter,” and you’ll be bombarded by claims that said demand is drying up faster than the Aral Sea, but accurate info on Model 3 orders is not an easy find.

JMP Securities analyst Joseph Osha told The Street “we believe that surge of late 2018 demand as buyers rushed to catch the full [federal EV tax] credit has created a hole in Q1 demand that Tesla is still working to figure out.”

Edmunds analyst Jessica Caldwell, speaking to the Los Angeles Times, said the entry-level car might have made a bigger splash had it arrived earlier. “If this model had come out when the Model 3 first launched and passion for Tesla was at its peak, shoppers might have given more latitude,” she said. “But the expectations have been set and it’s likely going to be a tough sell moving forward.”

Given that Musk won’t say if the standard model has a profit margin, it’s unlikely he’s worried about meager early sales.

While the online-only gambit will reportedly allow Tesla to drop prices by an average of 6 percent (as well as sell cars in more markets), online critics howled over the company’s plan to offer full refunds to buyers who return the car after a week, even with 1,000 miles on the odometer. The offer seemed ripe for both abuse and profit loss, they claimed.

[Image: Tesla]

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  • MKizzy MKizzy on Mar 01, 2019

    Keep it up Tesla. Not everyone want's to buy a car sight unseen regardless of the return policy. With more electric luxury models coming to market from full-line competitors, Tesla risks becoming the My Space of the electric automobile world: once all the rage then fading into nothing in the blink of an eye.

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    • Addm Addm on Mar 02, 2019

      @indi500fan Panasonic just make the cells. Tesla do the pack assembly. As mentioned below, Tesla do have good research credentials for the cell chemistry

  • HotPotato HotPotato on Mar 04, 2019

    While I don't care for his Trump-like personality characteristics, I've got to hand it to Musk for proving that an electric car can be quick, fun, sexy, luxurious, desirable, and now affordable too. I can't see anyone buying the long-range Nissan Leaf now unless they're hell-bent on getting a sedate hatchback with a soft ride.

  • Tassos SNAAB shot itself in the foot when it BASTARDIZED its unique brand by BADGE ENGINEERING its vehicles with GOD DAMNED GM, OPEL, CHEVY, LANCIA and who knows what other automotive RIFF RAFF. I know of no Saab Enthusiast (they do exist) who felt sorry when the stupid maker went BANKRUPT.
  • 28-Cars-Later Example is located in Coldwater Michigan, so..." needs work -- including new brakes."Brakes, brake lines, probably fuel lines. Probably should hit the master cylinder too unless there are seal only kits for it."It has an automatic transmission."Likely needs a new one of those as well."an exhaust leak"Add an exhaust to the list."an inaccurate speedo."Wow and TMU to boot!These days five to six bills isn't too horrible but this example could turn into a headache really quick due to parts availability. The right buyer for this is a small time tradesman, the HVAC guy who was just leaving my house is rolling a late P80 Volvo 850 sedan in manual which he treats like a truck. Said he'd love a wagon if he ever came across one... if you're local to Coldwater Michigan this is a nice work beater. Annual inspection/registration tax probably costs nearly as much as the car.
  • 2ACL Amazing price, but that's (IMO) a reflection of the interest in an old 2.0T repmobile made interesting only by being a wagon. The Epsilon 9-3 was a sanitized take on the Saab formula. That's not to say it lacks interesting variants, but this isn't one of them. If it had a stick, maybe. But this generation's automatics are sealed and known to become temperamental if not serviced. If the owner can't provide proof of regular servicing, run.
  • Tassos The 3 lt turbodiesel should be FAR, FAR more efficient than the 6.2. ANything that walks would be more efficient than the 6.2. Are you kidding me?The 3 lt turbodiesel in my 4,000 lb+, 208 HP, 400+ LBFT E320 Bluetecs is more efficient than even the 2.2 lt ICE with its meager 125 HP in my 1990, only 2,822 lbs, Accord Coupe 5 speed LX. 100%. I have the full detailed records to prove it beyond any doubt. I consistently get over 35 MPG HWY, which I never got with the Accord (usuallt 32-33 tops)The big question is, will GM ask $5k more for the diesel than for the gas version, as usual? Mercedes only asked $1k m ore for the diesel, $51k vs $50k for the gas back then, which you would recover in just ONE YEAR of average miles driven.
  • Cprescott Lucid has the right idea about building cars - I agree that these have a presence to them and certainly make all Teslas look like cheap golf carts with doors in comparison. I hope Lucid survives because they actually build luxurious products and not pretenders like Tesla.