Tesla’s surprisingly weak electric-car deliveries in the first quarter took a heavy toll on its bottom line.
The company said on Wednesday that it lost $702 million in the first quarter, a sharp reversal from the profits it made in the second half of last year. The loss, equivalent to $4.10 per share, was far greater than the $1.81 per share that Wall Street analysts, surveyed by FactSet, had forecast. The quarter’s revenue of $4.54 billion fell well short of expectations.
Tesla had $2.2 billion of cash at the end of the first quarter, a 40 percent decline from the figure at the end of last year. The company spent $920 million paying off a bond in March. Tesla’s operations consumed $640 million of cash in the first quarter.
Investors had been bracing for the red ink after Tesla said it sold 31 percent fewer vehicles in the first quarter than in the fourth quarter of 2018. The company said logistical challenges had hindered deliveries of the Model 3 sedan to Europe and China. A reduction in a federal tax benefit for Tesla’s buyers may have weighed on Model 3 sales in the United States.
Another weak spot for the company was its solar business, where sales dropped by more than 35 percent in the quarter.
“We expected weak results, but Tesla’s revenue and profit misses were stunning,” Vicki Bryan, chief executive of Bond Angle, a research firm, said in an email. “Revenue was soft, but spiking costs for obvious strategy missteps really drew blood at the bottom line.”
The big question for Tesla is whether the drop in car sales in the first quarter was a temporary phenomenon or something more serious. Sales of Model 3 sedans could recover as the company delivers cars overseas. But demand for the higher-priced Model S and Model X vehicles plunged 56 percent in the first quarter from the fourth, even though the company cut the price of the cars at the end of February.
Tesla said on Wednesday that the reduction in the tax credit might have weakened demand for the Model X and the Model S. The company added that after the price cut, the increase in orders for high-end versions of those models exceeded the available supply. Tesla is also hoping that buyers flock to new versions of the S and X that can travel farther on a full charge.
In an investor call after the results were announced, a stock analyst asked why Tesla was cutting prices if demand was strong for its products. Tesla’s chief executive, Elon Musk, responded that the goal was to make its cars “as affordable as possible.”
Analysts had slashed their earnings estimates in recent weeks, and after the anemic delivery numbers, Tesla again faces doubts that it can achieve its goals and meet Wall Street’s financial targets. Its stock was little changed in extended trading after the earnings announcement, but it is down over 30 percent from its most recent high.
Tesla said Wednesday that it expected to deliver 90,000 to 100,000 cars in the second quarter, up from 63,000 in the first three months of the year. It said it would lose money again in the second quarter, though less than in the first quarter, and would turn a profit in the third quarter.
Tesla’s supporters are hoping that Model 3 sales will surge and enable the company to meet its target of delivering 360,000 to 400,000 vehicles this year. Tesla affirmed that goal on Wednesday, but said its vehicle production would be “significantly higher than deliveries,” because of the time it takes to transport cars from California to other countries.
The company is now offering a $35,000 version of Model 3. The lower price may stir up demand for the car, but charging less could make it harder for Tesla to make a profit on the vehicle.
Tesla’s cash position is crucial to the company’s future. Mr. Musk intends to produce new vehicles in volume, including a large truck called the Semi, but setting up the new production facilities would consume large amounts of cash. Many analysts expect that Tesla will have to issue new shares to raise money.
Mr. Musk, who had previously said the company did not need more capital, indicated that he had changed his mind because Tesla was now in a position to use capital more efficiently. “There is merit to the idea of raising capital at this point,” he told analysts.
The New York Times