Tesla lost $ 702 million in the first quarter of 2019, having posted back-to-back profits for the first time ever in the end of 2018, the company announced in an official filing Wednesday. CEO Elon Musk had predicted that Tesla would push back to red on a February 28 conversation with the media. Telsa generated $ 4.5 billion in revenue for the quarter, down from $ 7.2 billion in the previous quarter, but up from $ 2.6 billion in the first quarter of 2018.
The company also announced that it does not expect to receive a profit in the second quarter, neither. Musk had previously guessed that Tesla would return to profitability to start well in the quarter. The loss of $ 702 million was the company's fourth worst quarterly loss since it was publicly traded in 201
"Everyone expected a loss in the first quarter for Tesla, but none expected to be so big," Karl Brauer, publisher at Kelley Blue Book and Autotrader, said in a statement.
Tesla completed the quarter with $ 2.2 billion in cash, a $ 1.5 billion decline from the end of 2018 – even though $ 920 million was accustomed to paying off debt in March. Of the $ 2.2 billion total, $ 768 million were customer deposits for cars such as model 3, model Y, second generation Roadster, Tesla Semi, and the company's energy products. Tesla said it would increase the cash balance every quarter ahead.
Tesla pointed out that it delivered 63,000 cars in the first quarter, as it originally announced at the beginning of the month, down from 90,000 in the fourth quarter of 2018. Tesla had previously attributed the downturn in the challenge of shifting focus to delivering model 3 in two new markets, Europe and China.
On a conversation with investors on Wednesday afternoon, Musk discussed the difficulty of sending three cars globally from a factory, which he said affected the first quarter results. "This is the most difficult logistics problem I've ever seen, and I've seen some tough," he said. New CFO, Zach Kirkhorn, called it "one of the most complicated quarters I can think of in the company's history." Tesla said on Wednesday that it expects to return to between 90,000 and 100,000 deliveries in the second quarter of 2019.
The loss is a sign that Tesla is still adjusting for a monster year of growth in 2018. Tesla went from delivering 1,550 model 3s in 2017 to about 140,000 of them in 2018, in addition to around 100,000 models S and X. The company more than doubled its total production in 2017 despite suffering through self-confidence "production hell" and "delivery logistics hell" and it was rewarded with its first profitable quarter for two years (and only the third and fourth ever). Model 3 was also the best-selling EV in the world.
Since they have posted these profits, questions have come over Tesla whether it has exhausted demand for Model 3 (as well as Model S and X) in North America. Some Wall Street analysts are particularly skeptical. Firstly, buyers of company cars are no longer eligible for a full $ 7,500 federal tax credit, which means that Tesla cars began the year a little more expensive than they were at the end of 2018. (The company initially reduced rates by $ 2000 to help offset the tax credit to $ 3,750, but has since made many more changes in price and availability in all models.]
Musk disputes this in January, saying that "the demand for model 3 is angry high. The inhibitor is affordable." On the 28th of February, Tesla announced that it had made the long-promised $ 35,000 version of Model 3 available for sale. Instead of achieving this price point through design, manufacturing, and engineering breaks alone, as originally planned, the company announced that it was cutting operating expenses by closing most of its stores, laying off workers, and switching to an online sales model.
But Tesla later recaptured and decided to just close some stores. The company now focuses mostly on online sales, but it has not stopped taking them in store or by phone altogether. In total, these changes cost Tesla $ 67 million, the company said Wednesday. (Musk added to the conversation that he and the company did not do a good job of handling the message to the closures, some employees had complained about.) Tesla also took a $ 121 million charge on the many price changes the company has made in recent months .
Meanwhile, the $ 35,000 version of the car was announced in February never sent. Instead, April 12, the company said it would take a slightly higher model 3, use software to limit features and ultimate selection, and sell the version of the car for $ 35,000. $ 35,000 model 3 has finally been shipped, but it is only available for purchase in the shop or phone. Musk said Wednesday that "very few people" took the company up on that offer and joked that Tesla had not set a "barrier" ahead of customers who would buy it.
The release of Tesla's quarterly result results comes amid a wild month's news for the company. A (not quite comprehensive) mention:
It's not over yet. Musk and SEC are due to send an update to the judge in their case on Thursday. Earlier this month, the judge asked them to "take their breath" and "come back with [their] reasonably pants on" in the hope that the two sides now reach an agreement.
The fight between Musk and the SEC began last year after Musk tweeted that he had "funding secured" to take Tesla privately. When it turned out not to be true, SEC charged him with security fraud. The two sides finally settled.
On Wednesday's call, Musk was asked how important it is for him that Tesla should become publicly traded.
"I prefer we were private," he replied. "But unfortunately that ship has sailed."