Tesla CEO and co-founder Elon Musk has told shareholders at the annual meeting in California that demand for the company’s pioneering electric cars is still holding strong, and has flagged a potential record quarter for sales and earnings.
After a difficult loss-making first quarter that had Musk explaining the logistical challenges faced by the EV maker during the initial stages of the expansion of its “mass-market” Model 3 into China and European markets, the CEO was keen on Wednesday morning (Australian time) to assure shareholders that demand is not flagging.
“There is not a demand problem. There is absolutely not,” Musk said.
Quite the opposite, says Musk, who at the end of May appealed to staff via email to do their bit to ramp up production to turn the company around from its previous quarter.
“Sales have far exceeded production and production has been pretty good,” he said, adding that in fact there was a good chance Tesla will be able to report a record profit next month after the end of this quarter.
“We’re actually doing well and we’ve got a decent shot at a record quarter on every level. If not, it’s going to be very close.”
To do that, it will have to beat the $US312 million ($A448 million) profit Tesla reported for the third quarter of 2018, which was the company’s first profitable quarter ever reported and notably included a 20% margin on its Model 3 alone.
At the Q1 2019 earnings call Musk said he expected that Tesla would break even for the second quarter, with a significant drop in its cash burn rate thanks to a one-off debt payment of about $US900 million ($A1.3 billion) and re-tooling costs of around $US250 million ($A360 million) paid in full during the first.
With Tesla’s Model 3 now well and truly in the thick of right hand drive markets (including Australia, UK, Hong Kong, Japan and New Zealand) in addition to the left hand drive markets of Europe and China, the appetite for the Model 3 is only expanding.
Which is not without its challenges, as noted by Musk and evident in Tesla’s Q1 loss.
“Profitability is always challenging if you’re a fast-growing company. It’s hard to be profitable with that level of growth,” said Musk, referencing the company’s 50% increase in production compared to 2018
Despite the expansions overseas that have characterised the start of 2019, Musk also pointed out that the 90 per cent of new orders the company is taking in this quarter are from “non-reservation holders, so these are new customers”.
Bridie Schmidt is lead reporter for The Driven, sister site of Renew Economy. She specialises in writing about new technology and has been writing about electric vehicles for two years. She has a keen interest in the role that zero emissions transport has to play in sustainability and is co-organiser of the Northern Rivers Electric Vehicle Forum.