27 October 2016
Elon Musk unveils the Model X. Tesla expects to sell 80,000 to 90,000 Model X and S vehicles in 2016,  Photo: Reuters
Elon Musk unveils the Model X. Tesla expects to sell 80,000 to 90,000 Model X and S vehicles in 2016, Photo: Reuters

Tesla vows to make money in 2016

Tesla Motors Inc. is promising investors it will start making money this year and will no longer be burning cash.

Chief executive Elon Musk told a conference call the company is determined to cut costs, hit production targets and stanch losses, Reuters reports.

Tesla shares rose more than 10 percent in after-hours trading after the company forecast a 60 to 80 percent increase in vehicle sales this year and promised it would turn a profit on an adjusted basis.

The stock is down more than 30 percent since the beginning of the year, reflecting investor concerns about continued losses.

Musk said Tesla expects to generate positive cash flow even after investing US$1.5 billion to add capacity to a huge battery factory in Nevada, and start producing battery cells there.

“Moderate GAAP profitability is expected in the fourth quarter,” Musk wrote in a letter to shareholders.

GAAP refers to the generally accepted accounting principles that govern how listed companies report results.

Tesla’s cash reserves had dropped to US$1.2 billion as of Dec. 31 from US$1.9 billion a year earlier, despite a sale of shares last summer.

The company’s cash burn has become a concern for some analysts given the heavy capital spending it has mapped out.

Tesla straddles the digital technology and automotive industries which have both been hard hit this year by investors worried that growth is slowing in both sectors.

General Motors Co. earlier this month reported record profit, but its shares have fallen 18 percent this year.

Deliveries of Model S sedans and Model X sport utilities were 17,478 vehicles in the quarter, at the low end of prior forecasts.

Revenue rose nearly 27 percent to a record US$1.21 billion.

“You cannot bet against Elon Musk,” said analyst Ivan Feinseth of Tigress Financial Partners.

Tesla said it plans to deliver 80,000-90,000 Model S and Model X vehicles in 2016, ahead of Wall Street’s average expectation for about 79,000 vehicles, according to research firm FactSet StreetAccount.

Tesla said its long-promised moderately priced car, the Model 3, would be unveiled on March 31. Musk, in the letter to shareholders, said the Model 3 should be launched in 2017.

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