Electric vehicle pioneer Tesla announced its first quarter delivery numbers last night — and the news is not good.
After pulling out all the stops to deliver a record 90,700 automobiles last quarter, Tesla delivered only 63,000 cars this past quarter. That’s a drop of 31 percent; below the company’s below and moving-target advice analysts&rsquo expectations. Bloomberg's Model 3 tracker missed production numbers by 26 percent.
Tesla began its Model 3 delivery efforts in Europe and China this quarter, along with the delivery miss can be attributed to the headwinds of tariffs, homologation distribution channels and overseas transport. However, Tesla’s most profitable vehicles, the S and X, saw their deliveries drop 56 percent in the previous quarter — and ’s bad news for margins.
Last year, CEO Elon Musk said he was optimistic about being profitable in the first quarter”and all quarters going forward.” The goal was to reach”a very small GAAP net income in Q1.”
But, confronted with this delivery shortfall and a decrease in ASPs, Musk now expects Q1 net earnings to be”negatively impacted.”
The CEO added, “Even so, we ended the quarter with sufficient cash on hand.” Tesla includes a $566 million debt due in November and will require capital for Model Y creation and lots of other projects. Tesla also has a substantial amount of cash tied up in the roughly 10,000 vehicles in transit and inventory to customers.
Stands behind 2019 delivery advice
Tesla maintained its advice of. Given the miss, assembly Tesla's advice will require more than 100,000 vehicles built per quarter in 2019, a greater degree than Tesla has achieved. It will require a sustained rate of 7,500 units per week, more than the Fremont mill has been able to keep, and perhaps more than manufacturing line or its paint shop can handle.
There’s a small chance that Tesla's China factory will be constructed and producing vehicles in 2019, but this would require unprecendented speed of construction, equipment installation and production ramp.
This quarter-to-quarter drop in earnings at Tesla breaks an almost two year increase streak and threatens Tesla's expansion narrative, valuation and its capacity to service its debt.
Shares wer more than 7 percent down in trading on Thursday, to around $270.
Tesla and Elon Musk have a busy April ahead of them: Tesla's Q1 cash flow and financial performance will be revealed in its earnings letter. There's an investor event centered on autonomous driving scheduled for April 19.
And now, April 4, Federal Judge Alison Nathan will hear arguments in a suit filed by the U.S. Securities and Exchange looking to maintain Musk in contempt for violating a settlement agreement. The civil contempt charge stems from Musk's non-approved tweet making conflicting claims 2019 delivery advice.
If found guilty, Musk could face restrictions on social media, a fine, or his improbable removal as CEO.
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