An unusually combative Musk talks Tesla profits, gives Model Y launch window

Tesla Model 3
Miles Branman/Digital Trends

Tesla recently invited journalists and analysts to participate in an earnings call. Discernibly annoyed, company co-founder and CEO Elon Musk discussed the company’s profitability, Model 3 production, and some of its future products. Here are the main takeaways from the call.

The California-based startup isn’t profitable yet. Automotive News reports its revenues soared to a record $3.4 billion during the last quarter but it ended the quarter with a $785 million loss, nearly twice the loss it reported at the same time last year. It’s sitting on $2.7 billion in cash and its debts amount to about $10 billion, the trade journal adds.

There’s a light at the end of the tunnel. Tesla continues to ramp up Model 3 production after months of what it famously labeled “production hell” and Musk stressed the firm won’t need to raise more money on the stock market this year in order to stay afloat. He expects Tesla will become profitable during the third quarter of 2018 if it reaches its goal of building 5,000 Model 3s per week. Weekly production currently stands at slightly under 2,300 units.

“I’m feeling quite confident about hitting positive cash flow in Q3. This is not a certainty. It does appear quite likely in my view,” he predicted. To get there, his team will restructure Tesla and whittle down the number of third-party companies it relies on to build its cars. Its supplier list “has gotten out of control,” which partially explains its inability to make money.

Significantly, Musk bluntly dodged a question from investment bank RBC Capital Markets about how many of the nearly 500,000 Model 3 reservation holders are following through with their purchase. “Sorry, these questions are so dry. They’re killing me,” he said. He also refused to answer a question from Sanford C. Bernstein, an investment research firm, about Tesla’s capital requirements because “boring, bonehead questions are not cool.”

He was more willing to talk about the company’s future product plans. He notably provided new details about the Model Y, a crossover Tesla will position below the Model X and possibly build on the same architecture as the Model 3. We expect the Y will be the company’s next brand-new model. It’s already in development, but it’s still about two years away from production.

“We will not be starting production of the Model Y at the end of next year. It’s probably closer to 24 months from now, 2020. We could not fit the Model Y production at Fremont. We’re jammed to the gills here. One thing I know for sure is it’s not here,” the executive explained. Production will instead take place in a brand-new factory. Tesla will announce the site’s location before the end of the year. The plant will simultaneously build cars and battery packs as Tesla aims to bring battery and vehicle production under the same roof.

When it does arrive, the Model Y will trigger a “manufacturing revolution,” Automotive News reports. Tesla notably wants to get rid of the traditional 12-volt electrical architecture found in virtually every new car sold today in order to simplify the manufacturing process.

Tesla stock opened seven percent down the morning after the call.

Updated: Added latest stock price.


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