Tesla hits a bump in the road with $619m third quarter loss

Elon Musk, chief executive officer of Tesla Inc. CHINA DAILY

DETROIT－Tesla's first attempt at mass production appears to have stalled after it recorded a third quarter loss of $619 million.

The car company has spent heavily to clear up production bottlenecks and bring its hotly anticipated Model 3 sedan to market.

But the loss, of $3.70 per share, compared to a profit of 15 cents per share in the third quarter last year was a far bigger decline than Wall Street had predicted.

Analysts polled by FactSet forecast a loss of $2.85 per share.

Tesla Inc's stock dropped about 5 percent to $305.31 in after-hours trading on Wednesday.

The $35,000 Model 3, which is half the cost of Tesla's previous cars, could move the auto manufacturer from luxury niche to mainstream.

It introduced the Model 3 in July with a massive party at its Fremont, California, factory in the United States.

Elon Musk, chief executive officer at Tesla, promised that the Model 3, which has more than 500,000 potential buyers on its waiting list, would be simpler to make than Tesla's previous vehicles.

Even so, it has been plagued by the same delays. The company produced just 220 Model 3s in the third quarter, far fewer than the 1,500 Musk promised.

And the problems will continue. Tesla now expects to make 20,000 Model 3s per month by the end of next year's first quarter.

Musk had initially set a target of December for that production milestone. He said a supplier to the battery factory was partly to blame for the delays.

"Tesla is learning what traditional automakers have long known, mass vehicle assembly is complicated and expensive," said Michelle Krebs, a senior analyst at Autotrader.com.

Musk, who held the company's earnings conference call from the company's Nevada battery factory, insisted things were improving.

He hoped Tesla will be making a few thousand Model 3s per week by the end of this year.

"I was really depressed about three or four weeks ago," he said. "Now I can see a clear path to sunshine."

And while some customers may be frustrated by the delays, they are not necessarily losing faith in the automaker.

"It is disappointing, but I would rather that Tesla make the car correctly and to an optimal finish than rush and turn out a disappointing product," said Lisa Gingerich, an attorney in Milwaukee, who reserved a Model 3 within minutes of the order bank's opening in March, 2016.

"At the rate Tesla is producing the Model 3, it may be my Christmas present to myself next year," she added.

A defiant Musk also stressed that the 14-year-old company recently delivered its 250,000th vehicle, up from 2,500 just five years ago.

"For the skeptics out there, ask them, which one of them predicted that Tesla would go from 2,500 units delivered to 250,000 units now? I would suspect zero," he said.

Tesla had other significant expenses in the third quarter.

The company opened 18 stores and service stations worldwide and set up 126 new Supercharger stations to try to prepare for the increase in demand from Model 3 buyers.

Musk did confirm that Tesla had fired 700 employees, or about 2 percent of its workforce, earlier this month because of poor performance reviews.

But he said the company's action was a typical one, not the result of the Model 3 issues.

Revenue at Tesla increased 30 percent to $2.9 billion for the quarter, in line with analysts' expectations.

Installations for its energy storage business more than doubled from a year ago. Energy generation and storage accounted for 11 percent of Tesla's third quarter revenue.

Sales of the company's two other vehicles, the Model S sedan and Model X SUV, jumped 4.5 percent to 25,915.

Tesla revealed net orders for those vehicles hit a record level in the third quarter, setting the stage for record deliveries in the fourth quarter.

The company announced it is on track to deliver 100,000 Model S and Model X vehicles in 2017, up 30 percent from last year.

Xinhua-Associated Press