Seeing Red Again: Tesla's Winning Streak Turns to a Loss in First Quarter

Steph Willems
by Steph Willems
seeing red again teslas winning streak turns to a loss in first quarter

Analysts and investors, who were already warned to expect disappointment, didn’t walk away disappointed from Tesla’s first-quarter 2019 earnings report. The automaker’s two-quarter streak of profitability came to a crashing halt, with the company warning that next quarter might bring with it another loss.

Quite an about-face from the rosy projections issued at the start of the year. It wasn’t all that long ago that CEO Elon Musk was only mildly worried about Q1. Now, as the company reports a $702 million loss, the onus is on Musk to restore investor enthusiasm the hard way.

Tesla ended 2018 in enviable form. Deliveries were up — way up — and the company would soon report the first back-to-back profits in its history. That all took a nosedive in Q1 2019, with deliveries falling sharply. Musk places much of the blame on the difficulty of getting vehicles to buyers in China and Europe, seasonal variability, and perhaps the halved federal tax credit — an anticipated cut the company tried to offset with pricing changes.

How did Tesla’s finances stack up in Q1? Vehicle revenue fell 71 percent from Q4 2018, to $3.72 billion. Loss per share was $2.90, whereas analysts predicted an average loss of 69 cents. Total revenue also fell short of expectations, at $4.54 billion versus the $5.19 billion predicted.

The company’s available cash stands at $2.2 billion, down $1.5 billion from Q4 2018. A $920 million debt payment that came due last month makes up a large chunk of this drop. If you’re curious, $768 million of that $2.2 billion sum is customer deposits.

As reported before, Tesla Model 3 production rose slightly in Q1 compared to the previous quarter — a throughput increase of just 3 percent — but Model S and X builds fell to their lowest point in years. As the average selling price of a Model 3 sits around $50,000, and both the Model S and X start well north of that figure, a revenue hit was inevitable. It’s no wonder the vaunted $35k Model 3 Standard Range was quickly relegated to ghost status.

In an investors call, CFO Zach Kirkhorn characterized the results as “one of the most complicated quarters that I can think of in the history of the company.”

Musk described the process of shipping vehicles abroad from its Fremont, California plant as “the most difficult logistics problem I’ve ever seen.”

Not helping the company’s balance sheet was a plan to shutter most of its retail stores after rolling out an online-only sales model. That plan almost immediately went off the rails due to lease obligations. Still, numerous sales employees got the axe.

“We will close stores in locations that are hard to find, and continue to add stores in locations where there is high foot traffic for people who are in our target market,” Musk told investors. “When you buy a car you will always do it on your phone.”

Despite the turmoil, Tesla still expects to deliver between 360,000 and 400,000 vehicles this year. As for Musk’s (quite recent) promise of building 500,000 vehicles this year, it’s looking dicy.

“If our Gigafactory Shanghai is able to reach volume production early in Q4 this year, we may be able to produce as many as 500,000 vehicles globally in 2019,” the company stated. “This is an aggressive schedule, but it is what we are targeting. However, based on what we know today, being able to produce over 500,000 vehicles globally in the 12 month period ending June 30, 2020 does appear very likely.”

[Images: Tesla]

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  • Tstag Tstag on Apr 25, 2019

    Let’s get this right Jaguar and Audis electric models already outsell the model S and X in Europe, this is a dot com style bubble about to burst

    • See 3 previous
    • SCE to AUX SCE to AUX on Apr 28, 2019

      @arthurk45: You're very consistently wrong with every comment about Tesla. Please cite some sales data to support your wild claims, particularly for cars that have actual sales. As for the Taycan - it shows promise, and it could outsell the Model S someday, but EV mfrs have a way of bungling promising vehicles (see Hyundai, Chevy, and Nissan).

  • APaGttH APaGttH on Apr 26, 2019

    ...If you’re curious, $768 million of that $2.2 billion sum is customer deposits... By accounting rules, that $768 million can't be touched until the deposit holder has their vehicle delivered. So cash on hand is closer to $1.5B. There is only 2 more quarters worth of cash that can take a $900M hit.

    • See 1 previous
    • SCE to AUX SCE to AUX on Apr 28, 2019

      @APaGttH: Based upon 6-figure levels of reservations for Model 3 and Y (at $1000 to $2500 each) your numbers make sense, and it seems clear that Tesla must turn the ship around soon.

  • Rng65694730 All auto makers seem to be having problems ! Still supply chain issues !
  • MrIcky I'd go 2500 before I went 1500 with a 6.2. I watched an engineer interview on the 2.7l. I appreciate that their focus on the 2.7 was to make it perform like a diesel and all of their choices including being a relatively large i4 instead of an i6 were all based around it feeling diesel like in it's torque delivery. It's all marketing at the end of the day, but I appreciated hearing the rationale. Personally I wouldnt want to tow much more than 7-8k lbs with a light truck anyway so it seems to fit the 1500 application.
  • MaintenanceCosts If I didn't have to listen to it, I'd take the 2.7 over the 5.3 based both on low-end torque and reliability record (although it's still early). But the 5.3 does sound a lot nicer.
  • Arthur Dailey The Torino Bird which was relatively short lived (3 years), 'feasted' on the prestige originally associated with the T-Bird name. The Cordoba originally did the same as it had a Chrysler nameplate. The Torino 'Bird had modified 'opera' style middle windows, a large hood with a big chrome grill and hood ornament, pop-up headlights, and a 'plush' interior. It was for the time considered a 'good looking' car and could be ordered with a 400 cid engine (the first 2 years) and even a T-bar roof. You can see one just behind De Niro and Liotta in Goodfellas when they are standing in the diner's parking lot and have learned that Pesci has been 'whacked'.Although a basically a renaming/redesign of the (Gran Torino) Elite, the Elite was for a time available with Ford's 460 cid engine.I had both an Elite and a 'Torino Bird'. Although their wheelbases were the same, the 'Bird always seemed 'bigger' both inside and out. The Elite seemed 'faster' but it had the 460 opposed to the 400 in the 'Bird. But those are just subjective judgements/memories on my part. However the 'box Bird' which followed it was a dud. It sold Ok the first year based on the T-Bird name, (probably mostly leases) but it quickly lost any appeal/prestige. Back then, the management/executives of the Toronto Maple Leafs used to get leased T-Birds every year. After the first year of the 'box Bird' they changed to different vehicles.
  • Parkave231 Random question that -- in the interest of full disclosure -- I am too lazy to look up on my own.Back in the day, cars in my mostly-GM family had a hard lock on the steering wheel, such that unless the key was turned to the ACC position, the steering wheel was physically locked in place.I don't recall whether my 2002 Deville locked the wheel in place, but I want to say it didn't, even though it still had a physical key.And now, of course, most everything is push-button, and my current Cadillac doesn't physically lock the wheel.So was the movement away from a literal physical lock of the steering wheel back in the 80s driven solely by the transition to push-button start, or was there some other safety regulation that got rid of them, or just something else that a car manufacturer could omit for cost savings by running something else through software (I'm guessing this since the H/K issue is a thing).