DETROIT – Tesla continues to struggle in the present even as CEO Elon Musk tries to shift investor focus to the future.
The automaker posted a $702 million net loss in the first three months of 2019, which Musk telegraphed in February after originally claiming the company would earn money every quarter this year.
The loss, slightly smaller compared with the same period a year ago, snapped a modest streak of two-consecutive profitable quarters for Tesla. The company has managed to generate net income in only four quarters since becoming publicly traded in 2010.
The electric vehicle maker's first-quarter revenue jumped 33 percent to $4.5 billion from the same period a year ago.
Automotive revenue in the first quarter rose 36 percent to $3.7 billion.
The company's non-GAAP automotive profit margin was 20 percent.
Musk said in a letter to investors Wednesday that the company expects to lose money in the second quarter but return to profitability in the third quarter.
Kerrigan Advisors recently sat down with Donnie and Denny Buckalew, co-owners of Buckalew Chevrolet, the 5th highest-volume Chevrolet dealership in Houston, Texas, to discuss their perspective on the changing auto retail industry and how challenges facing single-point dealers influenced their decision to sell their dealership.
It was one of Tesla's worst quarters on record, even as the company moved to slash costs by closing stores, embracing online sales and laying off employees.
Tesla also is no longer fully benefiting from federal tax rebates for EVs and the initial customer rush for Model 3s has waned. And more rivals -- notably German luxury brands -- are entering the EV marketplace.
"None of these issues are going away," said Karl Brauer, an analyst with Kelley Blue Book and Autotrader. "This is the new normal for Tesla."
The disappointing results came two days after Musk invited investors to experience the company's full self-driving vehicle technology and made a series of bold claims, including that Tesla would deploy one million robotaxis on U.S. roads next year, those vehicles would return annual profits of roughly $30,000 and that it would be "financially insane to buy anything other than a Tesla."
'Losing steam'
The company, which many analysts expect will have to raise more cash to fund operations, ended the latest quarter with $2.2 billion in cash, down from $3.7 billion at the end of 2018, largely after paying off a $920 million convertible bond due in March.
On Tuesday, Tesla announced in a blog it would reintroduce lower-priced versions of the Model S and X and increase their driving range as demand for its vehicle lineup appears to be waning.
Global deliveries plunged in the first quarter by almost 30,000 vehicles from the preceding quarter, the automaker reported this month. The company has struggled to deliver the new Model 3, billed as an affordable EV for the masses.
"Tesla can take credit for putting electric vehicles on the map, but all signs seem to show that the brand is losing steam," Jessica Caldwell, executive director of industry analysis at Edmunds, said in a statement.
Edmunds said many of the vehicles that Tesla produced in the first quarter were shipped to foreign markets, a sign U.S. demand is softening.
"It's an uphill battle for Tesla and there doesn't seem to be much on the horizon that could help boost momentum in the company's future," Caldwell said. "The clock is ticking on EV tax credits, the Model Y didn't wow consumers the same way the Model 3 did more than three years ago, and despite Musk's claims during Tesla's Autonomy Day, it's probably a bit ambitious to say that the company will nearly triple the number of vehicles it has sold in its entire history as a company by 2020."
New insurance product
Musk, on an earnings conference call Wednesday, argued the automaker continues to “see strong demand” for its vehicles.
However, Musk, citing consumer concerns about high insurance costs, said Tesla would begin offering an insurance product next month. Without offering details, he said it “will be much more compelling than anything else out there.”
He added Tesla has ordered all of the tooling for Model Y production and it was deciding between California and Nevada sites to build the crossover. He said a decision would be made “in the next few weeks.”
Although analysts expect the company to raise capital in the near future, Musk argued it would be “healthy to be on a spartan diet” for a certain period of time.
“It is very important as the company scales to make sure we are on a solid foundation and have the appropriate financial discipline and are spending money very efficiently,” he said. “At this point I think we are doing that. Tesla today is a far more efficient organization than it was a year ago.”
Tesla said Wednesday it still expects to sell 360,000 to 400,000 vehicles worldwide in 2019 and said it may produce as many as 500,000 vehicles this year if a new factory in Shanghai reaches volume output in the fourth quarter.
"This is an aggressive schedule, but it is what we are targeting," the company said. "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."
