Musk reiterated a bold target of a million cars a year by 2020.

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.




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