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Tesla Inc

Tesla in reverse as it slumps to US$702mln first-quarter loss

Sales of its electric cars slumped in the opening three months of 2019, with the recent cuts to US tax credits and delays in shipping to overseas buyers hurting Tesla

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Tesla expects another loss in the second quarter before returning to profitability

After two profitable quarters, Tesla Inc (NASDAQ:TSLA) slumped to a huge loss in the first quarter of 2019 and expects to post another loss for the three months after as well.

The electric carmaker swung to a US$702mln loss in the quarter ended 31 March. That’s equivalent to US$2.90 per share, far worse than the US$0.69 loss Wall Street number crunchers had expected.

At US$4.54bn, revenue also missed estimates, with analysts previously pencilling in US$5.2bn.

READ: Tesla plunges as it posts biggest sales drop in its history

It burned through US$1.5bn of cash in the opening three months of the year, although US$920mln of that went towards repaying a bond.

Despite the sluggish start to the year, Tesla once again repeated its guidance of delivering between 360,000-400,000 new cars this year.

“As the impact of higher deliveries and cost reduction take full effect, we expect to return to profitability in Q3 and significantly reduce our loss in Q2,” read a statement to shareholders.

The share price reaction was more muted than you might expect, with the stock only down 1.3% in pre-market trading in New York.

Logistical woes

That is because much of the bad news had already been flagged in an earlier update, in which Tesla warned of the biggest sales drop in its history.

The company, founded and run by eccentric billionaire Elon Musk, delivered 63,000 vehicles in the first three months of 2019, down by almost a third from the 91,000 it sold in the previous quarter.

It was the first quarter-on-quarter drop in sales for almost two years and the largest in the US$50bn firm’s history.

At the time, Tesla said there were two main reasons for the sharp drop-off: firstly, it rushed to complete some sales at the end of 2018 so buyers could take advantage of tax breaks before they were cut.

Secondly, “a large number of vehicle deliveries” had been pushed back to the second quarter with almost 11,000 in transit to Europe and China.

Tesla production ramp-up 'not fast enough'

“The effect of the cut to federal tax credits paid to buyers of its vehicles on Jan 1st has had a clear impact,” said Markets.com analyst Neil Wilson.

“Sales revenues were down 41% from the fourth quarter. Going forward, the erratic pricing policy of the Model 3 is a worry – can Tesla make it at a price that is acceptable to consumers but is still profitable?”

He added: “Tesla reaffirmed prior guidance of 360,000 to 400,000 vehicle deliveries in 2019, representing an increase of approximately 45% to 65% compared to 2018.

“However as previously noted, at the lower end it would be flat on the second half of last year, whilst at the top end it would mean growth in sales of 10%, which is hardly inspiring.”

Quick facts: Tesla Inc

Price: $243.79

Market: NASDAQ
Market Cap: $43.68 billion
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