Tesla said it would build up to 55,000 Model 3s in the current quarter at a positive gross margin, buoying hopes that the electric vehicle maker led by Elon Musk will meet its goal of profitability and positive cash flow in 2018, as it strives to recover from manufacturing challenges.
Tesla said that during July it had “multiple times” hit its earlier goal of building about 5,000 Model 3s per week, and reiterated a target of producing 6,000 per week by late August. Analysts have questioned whether that 5,000 rate would be sustainable.
Building 55,000 vehicles in the third quarter works out to an average weekly rate of 4,230 Model 3s.
Tesla said demand for the Model 3 remained strong. It delivered its 200,000th electric car – including its more expensive Model S and X vehicles – in July, a threshold which means a $7,500 US federal subsidy begins to phase out two quarters after that milestone was reached.
Tesla said it produced 53,339 vehicles in the second quarter and delivered 18,449 Model 3s.
“We aim to increase production to 10,000 Model 3s per week as fast as we can,” the company said.
Chief executive Musk is under intense pressure to prove he can deliver consistent production numbers for the new sedan, which has faced a host of manufacturing challenges since last year. The company has consistently denied it will need to raise cash but several Wall Street analysts expect a move by the end of the year.
Tesla ended the second quarter with $2.78 billion in cash after spending $610 million in quarterly capital expenses. It had ended the first quarter with $3.2 billion in cash after spending $656 million in capital expenses.
Free cash flow, a key metric of financial health, narrowed to negative $740 million in the second quarter from negative $1 billion in the first quarter, excluding costs of systems for its solar business.
The company last quarter cut its spending forecasts and Tesla has begun to lay off nine per cent of its workforce.
Last month, Tesla opened up reservations for the closely-watched Model 3, allowing new buyers of pricier models to jump ahead of those who had ordered base models of the vehicle two years ago. That angered some deposit-holders, and analysts questioned whether more would drop out because of delays making the cheaper $35,000 version of the sedan. Tesla said in July there were about 420,000 reservations for the Model 3, and did not update that number on Wednesday.
Musk’s behavior has come under scrutiny, in part after he dismissed financial analysts on the previous quarter’s conference call as boring, sparking a sell-off, and lashed out on Twitter at critics.
Musk’s tweet last month calling a British diver working on the cave rescue of Thai schoolboys a “pedo guy,” or pedophile, elicited a rare rebuke from Tesla’s fourth-largest shareholder, Baillie Gifford, that Musk should stop tweeting and focus on executing the company’s business at hand. Musk apologized to the diver.
Tesla reported a loss of $717.5 million, or $4.22 per share, for the second quarter ended June 30, compared with a loss of $336.4 million, or $2.04 per share, a year earlier.
Excluding items, Tesla reported a loss of $3.06 per share.
Total revenue rose to $4 billion from $2.79 billion.
Tesla shares were up five per cent at $316.45 in after-market trading on Wednesday. The stock has slumped 19 per cent since a 2018 high of $370.73 in June.