Elon Musk Takes on Short Sellers Ahead of Earnings

Anna Jefferson
August 2, 2018

Electric auto maker Tesla achieved its goal of producing 5,000 Model 3 vehicles per week by the end of its second quarter in June, but saw its biggest net loss to date.

Musk reiterated a target of producing 6,000 Model 3 sedans per week by late August. The company is also planning a new factory in China that will require significant funding, which the company says it will raise through local debt.

But chief executive Elon Musk pledged to post net profits in future quarters, and on a conference call, he apologised to two analysts he cut off on the company's first-quarter call. Analysts have questioned whether the 5,000 rate would be sustainable.

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That means for the entire year, growth will be about 3%, not much better than we have seen in the past few years. But many think the annual 4.1 percent growth rate last quarter is likely the high point for any one quarter.

In a statement released after the markets closed Wednesday, Tesla said it expects to produce 50,000 to 55,000 Model 3s in the third quarter, an increase of at least 75 per cent from the first quarter.

Tesla delivered its 200,000th electric auto - including its more expensive Model S and X vehicles - in July, a threshold which means a $7,500 federal subsidy will remain in place to the end of the year.

Tesla pulled out all the stops to finally hit that goal at the end of June, flying in a production line from Germany on a cargo plane, adopting an around-the-clock schedule and erecting a massive tent to house another assembly line in the parking lot of its California plant.

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On Tuesday, the White House announced US$12 billion (S$16.3 billion) worth of aid for farmers affected by retaliatory tariffs. The trouble is, China a year ago imported $12.3 billion in United States soybeans, the European Union just $1.6 billion.

But investors were encouraged by the auto company reaching its Model 3 targets and shares surged 9.3% in after-hours trading. That angered some deposit-holders, and analysts questioned whether more would drop out because of delays making the cheaper $35,000 version. But Tesla's cash burn in the second quarter slowed from about $US1.1 billion.

Tesla is continuing its elusive search for overall profitability, as it reported a loss of USD 743 million for the Q2 - marginally lower compared to losses of USD 770 million and USD 785 million in the previous two quarters. The CEO carried out a reorganization last quarter and announced that 9 per cent of the company's workforce would be dismissed. Analysts expected a loss of $2.92 per share on revenue of $3.92 billion.

Total revenue rose to $4 billion from $2.79 billion. The stock has slumped 19 percent since a 2018 high of $370.73 in June.

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That is the price you pay when you are named after one of - if not the - greatest basketball player to ever walk the earth. Time well tell whether or not junior will be the basketball player many expect him to be.

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