Date
17 October 2017
A prototype of the Tesla Model 3 is on display outside a factory. The company says the car is on track to begin production. Photo: Reuters
A prototype of the Tesla Model 3 is on display outside a factory. The company says the car is on track to begin production. Photo: Reuters

Tesla assures Model 3 on track as cash burn continues

Tesla Inc. assured investors its highly anticipated Model 3 sedan is on track to begin production, mitigating concerns that the carmaker led by Elon Musk is burning through more cash to bring the vehicle to market, Bloomberg reports.

The Model 3 remains on schedule for output to start in July, Tesla said Wednesday as it reported first-quarter earnings results in a letter to shareholders. Excluding some items, Tesla lost US$1.33 a share, a bigger deficit than analysts estimated.

Cash burn was the second most in the company’s history, behind only the final period of last year.

Musk, 45, has flagged plans to spend heavily during the first half of this year to bring out Tesla’s most affordable car to date.

Keeping the sedan’s arrival on course is essential to supporting Tesla’s high-flying share price, which vaulted the company’s valuation past the much larger and profitable General Motors Co. and Ford Motor Co. last month.

“All eyes are on the Model 3, and reaffirming the July guidance is great,” said Joe Dennison, associate portfolio manager of Zevenbergen Capital Investments in Seattle. “We’re at an inflection point where we’ll see just how big of a company Tesla may ultimately be.”

Tesla shares fell about 2.7 percent to US$302.50 as of 6:35 p.m., after the close of regular trading. Analysts were projecting the Palo Alto, California-based company would report a loss of about 82 US cents a share.

In the first quarter, Tesla burned through US$622.4 million — about half the amount raised in equity and debt offerings earlier this year. The company expects to roughly triple capital expenditures in the second quarter compared with the first three months.

The rollout of the Model 3 sedan will give an indication of how much the enigmatic Musk learned from mistakes made with the Model X sport utility vehicle. First introduced in late 2015, the vehicle was marred by design changes, parts shortages and build problems.

“Tesla had a lot of troubles with the Model X, but they’ve simplified the Model 3,” Cole Wilcox, CEO of Longboard Asset Management, said in an interview ahead of the earnings release. “It’s all about execution on the Model 3 ramp and proving that they can manufacture in high volumes.”

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