San Francisco, California - Tesla says it's sticking with chief executive Elon Musk's
revised production targets for its Model 3 sedan, cheering
investors who have put up with two delays, but plans to raise spending in 2018 underscore its
growing need for cash.
Money-losing Tesla's long-term viability depends on annually
selling thousands of Model 3s, the new sedan that
starts at $35 000 (R422 000), about half the price of its flagship Model S. Tesla lost nearly $2 billion in 2017.
Production delays blamed on battery issues resulted in only
1550 deliveries in the fourth quarter, far below the 4100 expected by analysts - meaning revenue from the highly
anticipated Model 3 has yet to impact the company's bottom line. Tesla posted its biggest-ever quarterly loss, but the loss was not as wide as analysts were expecting, and revenue just topped targets.
But obstacles to production of 5000 Mode 3s by the end of
the second quarter "were getting smaller with every week," Musk
told analysts on a conference call. Once at that production
rate, Tesla could begin to generate sustained positive operating
income "at some point in 2018," Musk said.
'A million cars a year'
Musk reiterated a bold target of a million cars a year by 2020, with plans to make capital investments related
to the upcoming Model Y SUV toward the end of 2018. Nearly
two years ago, Musk proclaimed that Tesla would produce 500 000
vehicles in 2018, which Model 3 troubles has made almost impossible.
Analyst Jamie Albertine at Consumer Edge Research said there
was a trade-off between accelerating growth and vehicle quality,
and it was better not to rush Model 3 production and risk a
recall. Tesla's reiteration of its production target for the
quarter was good news, he said.
Competitors
The niche carmaker has made inroads among luxury car buyers
with the advanced technology and innovative design in its Model
S sedan and Model X SUV. Still, it faces a wave of electric vehicles from competitors
on the horizon. Global automakers from Ford to
Volkswagen are investing $90 billion between them in electrification over the next five years, with luxury models
from Audi and Jaguar due to hit
showrooms in mid-yearr.
Amid that sales pressure, Musk announced that Jon McNeill,
president of global sales and service, and seen by some as a
possible successor to Musk, was leaving the company to join ride hailing company Lyft as its new chief operating
officer.
Musk scored a clear victory on Tuesday with the successful
launch of the world's most powerful rocket, Falcon Heavy, made
by his private company SpaceX. But some analysts
have questioned whether his varied other interests, from
space exploration to tunnel boring technology, are a distraction
at a critical time within Tesla.
Reuters
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