Tesla Inc on Wednesday surprised investors with a quarterly profit that sent its shares soaring, as Chief Executive Elon Musk promised a 2020 rollout of a cheaper SUV and more self-driving technology to stay ahead of larger rivals rushing into the premium electric vehicle market he created.



Shares rose nearly 21% to $307.12 after hours on the unexpected news, crossing $300 for the first time since March 1 after record deliveries and cost cuts ensured a profitable third quarter.



Tesla on Wednesday posted a cash balance increase to $5.3 billion (£4.11 billion) and reported a profit of $1.86 per share, shattering analyst expectations for a loss of 42 cents per share.



The third-quarter results are an important milestone for Tesla and redemption for Musk who had to step down as chairman after a series of scandals and investor doubts about Tesla’s ability to withstand competition from larger, better capitalized global rivals.



Tesla’s gross margins, an important profit indicator for investors, surpassed expectations and Tesla said it was “highly confident” in exceeding the low end of its yearly global vehicle delivery goal.



But Tesla has yet to prove that it can be consistently profitable while managing the start of production for Model 3 sedans at its new factory in Shanghai and for Model Y sport utilities next year.



“Given the breakneck speed of expansion, Tesla will face significant demands on its cash pile,” said Nicholas Hyett, an analyst at Hargreaves Lansdown.



The company on Wednesday said production in Shanghai and for Model Y are ahead of schedule, with the latter expected to launch by the summer of 2020.



Tesla also has to contain costs as it develops a gigafactory in Europe, a Semi truck, an electric pickup truck, a new generation of the Tesla Roadster and automated driving features.



The carmaker said it had cut costs 16% on a yearly basis, citing improvements in operating efficiency and a reduction in manufacturing and material costs. Musk said on a conference call that operating costs were the lowest since Model 3 production started.



Margin expectations are higher for Model Y than Model 3, while productions costs are roughly the same as Model 3, said Zach Kirkhorn, Tesla chief financial officer.



Model 3 vehicles made in the Shanghai factory will have roughly the same margins as those made in Fremont, California, he said.



Tesla also expects to generally be cash flow positive as it has grown to the point of being self-funding. (Graphic: https://tmsnrt.rs/2MF6HHq)



That will allow the company to invest in divisions focusing on sustainable energy, including launching the third version of its solar roof tile this week.



“For about a year and a half we stripped Tesla energy of resources,” Musk said. “Now that Model 3 production is in a good place and headed to a great place we have restored resources to Tesla storage and solar. That’s going to be really crazy growth.”



Musk also said Tesla is open to supplying batteries and other components to other automakers.



With Wednesday’s after-hours surge, Tesla’s stock has reduced its loss year-to-date to 8% and added about $9 billion to its market capitalization.



But Tesla rallies have been short-lived before.



A year ago, Tesla gave a quarterly report that similarly smashed investors’ expectations, igniting a rally that sent its shares 31% higher over the next two months, only to see the stock decline through much of 2019 over worries about corporate governance, profitability and demand for the Model 3. (Graphic: https://tmsnrt.rs/2PgxXgT)



Investors in the past have shown impatience with the company’s serial failures to meet financial and production targets. Earlier this month, Tesla shares slumped after the company reported delivering 97,000 vehicles for the third quarter, only 2% ahead of the previous quarter.



But Tesla on Wednesday exceeded promises by billionaire Musk, who in July said Tesla would break even in the third quarter and turn a profit by the end of 2019.



The company has said it plans to deliver 360,000 to 400,000 vehicles for all of 2019, and on Wednesday said it was “highly confident in exceeding 360,000 deliveries this year.”



Analysts have questioned how rapidly Tesla’s vehicle sales will grow as government subsidies for electric vehicle purchases dwindle in the United States, China and other markets.



Kirkhorn on Wednesday said Tesla saw growing order rates in all markets, with current quarter orders exceeding those of the past three months.



Tesla has said it aims to produce at least 1,000 Model 3 cars a week at the new Chinese factory by the end of this year, but it is unclear when it will meet year-end production targets due to uncertainties around orders, labour and suppliers.



Revenue fell nearly 8% to $6.30 billion in the quarter ended Sept. 30. Analysts had expected revenue of $6.33 billion, according to&nbsp;IBES&nbsp;data from Refinitiv.



Tesla on Wednesday said it would gradually release nearly $500 million of accumulated revenue tied to its “full self-driving capabilities”, which customers can buy for $6,000 even though fully automated driving is not available.



Kirkhorn on Wednesday said deferred revenue would also be released as Tesla expands its “Smart Summon” feature, which allows customers to operate a Tesla from 200 feet (60 meters) away using a smartphone app.



Federal safety regulators are looking into the feature after videos began appearing online showing driverless Teslas hitting obstacles or nearly hitting other vehicles.



Musk on Wednesday said software updates over the coming weeks would improve Summon.

large_Tesla-logo-and-car-generic.jpg_38408210_ver1.0_1280_720.jpg

medium_Tesla-logo-and-car-generic.jpg_38408210_ver1.0_1280_720.jpg

small_Tesla-logo-and-car-generic.jpg_38408210_ver1.0_1280_720.jpg

thumbnail_Tesla-logo-and-car-generic.jpg_38408210_ver1.0_1280_720.jpg

Tesla-logo-and-car-generic.jpg_38408210_ver1.0_1280_720.jpg

Tesla shares soar 21% as surprise profit answers sceptics

Tesla Inc has agreed to buy batteries from South Korea’s LG Chem Ltd for electric vehicles manufactured in China, Bloomberg reported on Friday citing people familiar with the matter.
The batteries made by the South Korean chemical company will be initially used in Model 3 cars that are manufactured in the plant near Shanghai, the report Вloomberg.
Tesla did not immediately respond to Reuters request for comment.

medium_773x435_tesla-to-buy-batteries-from-south-koreas-lg-chem-bloomberg.jpg

small_773x435_tesla-to-buy-batteries-from-south-koreas-lg-chem-bloomberg.jpg

thumbnail_773x435_tesla-to-buy-batteries-from-south-koreas-lg-chem-bloomberg.jpg

773x435_tesla-to-buy-batteries-from-south-koreas-lg-chem-bloomberg.jpg

Tesla to buy batteries from South Korea’s LG Chem – Bloomberg

Volkswagen CEO Herbert Diess is interested in acquiring a stake in Tesla, German business publication Manager Magazin reported on Thursday, citing company sources.
“Diess would go in right away if he could,” the magazine quoted one of Diess’ top managers as saying.
Diess believes Volkswagen could profit from Tesla’s competence in the fields of batteries and software, Manager Magazin said, adding the German company had enough money.
Acquiring a stake would be sufficient for a start, the report said.
A bigger obstacle, however, would be to get the consent of Volkswagen’s dominating owner families, the Piechs and the Porsches.
Volkswagen was not immediately available for comment.
A banker close to Volkswagen said that while it is true that Diess would love to have Tesla’s software developers, he believed it is almost impossible to justify paying $30 billion (27.09 billion euros) to buy the whole company.

medium_773x435_volkswagen-ceo-interested-in-tesla-stake-manager-magazin.jpg

small_773x435_volkswagen-ceo-interested-in-tesla-stake-manager-magazin.jpg

thumbnail_773x435_volkswagen-ceo-interested-in-tesla-stake-manager-magazin.jpg

773x435_volkswagen-ceo-interested-in-tesla-stake-manager-magazin.jpg

Volkswagen CEO interested in Tesla stake – Manager Magazin

A Tesla Inc owner has filed a lawsuit against the electric vehicle maker, claiming the company limited the battery range of older vehicles via a software update to avoid a costly recall to fix what plaintiffs allege are defective batteries.
The lawsuit filed on Wednesday in Northern California federal court alleges fraud and seeks class action status for the potentially “thousands” of such Model S and X owners around the world who have seen the range of their older-generation batteries suddenly curtailed, some by as much as 40 miles (64 km).
The lost range has been a hot topic since May on online owner forums, such as TeslaMotorsClub.com, in which many owners detail how their battery range has fallen. Users say Tesla has taken away range for which they paid extra money via the software update, thereby devaluing the car, limiting the distance they can travel and forcing them to recharge more frequently.
Plaintiff David Rasmussen’s 2014 Model S 85 lost battery capacity equivalent to about 8kWh, but was told by Tesla the degradation was normal, the lawsuit says.
Tesla did not immediately respond on Thursday to requests for comment.
In May, after a Model S caught fire in Hong Kong, Tesla said that out of an overabundance of caution it was revising charge and thermal management settings on Model S and X vehicles via an over-the-air software update. The goal was “to help further protect the battery and improve battery longevity,” it said.
A month later, Tesla said only a small group of owners was affected by the range reduction and said it planned to improve the impact of the software update, while cautioning that charging behaviour was based on a variety of factors.
Some owners who have seen their cars no longer able to charge to 100% have sought redress through arbitration, while at least three have sold their cars, according to Teslamotorsclub.com forum posts. Others have disabled their Wi-Fi to avoid any software updates that could affect their range.
“Under the guise of ‘safety’ and increasing the ‘longevity’ of the batteries of the Class Vehicles, Tesla fraudulently manipulated its software with the intent to avoid its duties and legal obligations to customers to fix, repair, or replace the batteries of the Class Vehicles, all of which Tesla knew were defective, yet failed to inform its customers of the defects,” wrote the lawsuit.
The lawsuit points to a recent spate of Tesla battery fires, and claims that instead of informing its customers about a potential fire risk, the company “chose to go behind the backs of its customers and use software updates and throttling of the battery to avoid liability.”
In its Vehicle Safety Report published on its website, Tesla says vehicle fires are “exceptionally rare” and from 2012 to 2018 there was approximately one Tesla vehicle fire for every 170 million miles travelled. It compares that with data from the National Fire Protection Association and the U.S. Department of Transportation showing a vehicle fire for every 19 million miles travelled in the United States. Those entities measure fires in all vehicles, not just Teslas.
In May, Tesla said its vehicles were 10 times less likely to experience a fire than a gas car. It said that in its investigation of the Hong Kong fire, it found that only a few battery modules were affected and the majority of the battery pack was undamaged.
One owner, Nick Smith of Orlando, Florida, said in an interview he has been frustrated by poor customer service by Tesla, with sluggish response to his calls and emails and being kept in the dark over the true root of the problem and what will be done to remedy it.
“It’s as if you take your car to the shop and you have a 20 gallon tank but now you have a 10 gallon tank without your knowledge or permission,” Smith said in an interview.
Smith’s 2013 Model S P85 will no longer charge past 90% following the software update. Tesla told him the loss was due to normal regular battery degradation, he said.
The batteries in question carry an eight-year warranty.

medium_773x435_tesla-hit-by-lawsuit-claiming-thousands-of-owners-lost-battery-capacity-after-software-.jpg

small_773x435_tesla-hit-by-lawsuit-claiming-thousands-of-owners-lost-battery-capacity-after-software-.jpg

thumbnail_773x435_tesla-hit-by-lawsuit-claiming-thousands-of-owners-lost-battery-capacity-after-software-.jpg

773x435_tesla-hit-by-lawsuit-claiming-thousands-of-owners-lost-battery-capacity-after-software-.jpg

Tesla hit by lawsuit claiming thousands of owners lost battery capacity after software update

Shares of Tesla Inc jumped 8% on Wednesday after Chief Executive Officer Elon Musk made good on his promise of delivering record number of electric cars in the second quarter, quelling fears about demand for its sedans and SUVs, Reuters reports.
Wall Street analysts and investors have raised doubts about demand and the Silicon Valley automaker’s ability to sort out recent delivery issues, particularly after a disastrous first quarter when deliveries slumped 31%.
“We are increasingly comfortable that they should reflect an even better in the third quarter, and probably their first hundred thousand in a quarter,” Roth Capital analyst Craig Irwin said.
Tesla delivered a record number of 95,200 vehicles in the second quarter, beating analysts’ average estimates, but did not comment on when it would return to a profit.
Shares of Tesla were set to open at their highest in two months. Up to Tuesday close, the stock had lost nearly one-third of its value so far this year.
Tesla’s first quarter was hurt by logistics issues at its international ports and a drop-off in U.S. orders after a tax credit was halved, which spurred concerns that Tesla may have tapped a limited market for electric cars at premium prices.
While Musk has been trying to convince investors that demand remains high for Tesla cars and delivery could be made efficiently, some analysts remained sceptical about Tesla’s ability to deliver on its promise.
The CEO has repeatedly said Tesla could deliver a record number of cars in the second quarter, beating the 90,700 it sent to customers in the final quarter of last year.
In the quarter, Tesla delivered 77,550 Model 3s – seen as linchpin for its growth into a mass-market company. That compared with analysts’ average estimate of 73,144, according to IBES data from Refinitiv.
“These are undeniably strong numbers, but given Tesla’s recent history of significant swings in performance from quarter-to-quarter we remain cautious for now,” Nicholas Hyett, analyst at Hargreaves Lansdown said.
Tesla still faces multiple challenges, including starting production in China in the backdrop of U.S.-China trade tensions and overhauling its production process at a time several of its top executives are leaving the company.
“We think bears will argue results are a flash in the plan, though we believe deliveries are sustainable and note the release does mention TSLA is well positioned to continue growing total production and deliveries in Q3,” Baird analysts said.

medium_773x435_tesla-shares-jump-as-record-deliveries-ease-demand-concerns.jpg

small_773x435_tesla-shares-jump-as-record-deliveries-ease-demand-concerns.jpg

thumbnail_773x435_tesla-shares-jump-as-record-deliveries-ease-demand-concerns.jpg

773x435_tesla-shares-jump-as-record-deliveries-ease-demand-concerns.jpg

Tesla shares jump as record deliveries ease demand concerns

Shares of Tesla fell for a sixth straight session on Wednesday after Citi cut its price target on the struggling electric car maker, leaving buyers of its recent share offer, including Chief Executive Elon Musk, $167 million in the hole, Euronews <a href="https://www.euronews.com/2019/05/22/tesla-drops-for-sixth-straight-session-down-20-percent-since-share-offer" target="_blank" rel="noopener">reports</a>.
Tesla&#8217;s stock dropped 4.3% to $196.10, on track to close below $200 for the first time since late 2016. It has tumbled 20% since the company sold a $1.84 billion convertible bond and almost $900 million of stock on May 2 to raise fresh capital and give it more time to stop losing money.
Citi analyst Itay Michaeli, who has a &#8220;sell&#8221; rating on Tesla, cut his price target to $191 from $238. He pointed to a an email Musk sent to employees last week, telling them he would increase cost-cutting, and that the $2.7 billion in recently raised capital would give Tesla just 10 months to break even at the rate it burned cash in the first quarter.
&#8220;The recent reported internal memo, which seemingly called into question prior guidance, didn&#8217;t help the risk/reward calculus. The implications can be serious, since an automaker&#8217;s balance sheet is always subject to the confidence &#8216;spiral&#8217; risk,&#8221; Michaeli wrote in a client note.
Musk is battling to convince investors that demand remains high for the Model 3, the sedan targeted to propel Tesla to sustainable profit, and that it can be delivered efficiently and swiftly to customers around the world. Tesla lost $702 million in the first quarter and warned that profit would be delayed until the latter half of the year.
Musk on Monday exercised options to buy 175,000 Tesla shares at $31.17 per share, increasing his indirect stake in the company to 34,102,560 shares, according to a filing. With Tesla’s stock down 41% year to date, Musk&#8217;s shares, including 102,880 he bought in this month&#8217;s capital raise, were worth $6.7 billion on Wednesday.
Tesla&#8217;s debt has stalled at lows hit earlier this week. Its recently issued convertible bond due in 2024 priced at 89.09 cents on the dollar, a record low. Its $1.8 billion junk bond traded at 82.5 cents on the dollar, slightly up from the all-time lows it hit on Monday and Tuesday.
The cost to insure Tesla&#8217;s debt, as measured by its credit default swap, edged up to roughly 28% of the face value of Tesla’s 2025 bond, from 27.6 % the day before.

medium_773x435_tesla-drops-for-sixth-straight-session-down-20-percent-since-share-offer.jpg

small_773x435_tesla-drops-for-sixth-straight-session-down-20-percent-since-share-offer.jpg

thumbnail_773x435_tesla-drops-for-sixth-straight-session-down-20-percent-since-share-offer.jpg

773x435_tesla-drops-for-sixth-straight-session-down-20-percent-since-share-offer.jpg

Tesla drops for sixth straight session, down 20% since share offer

Tesla Inc said on Friday that four members of its eleven-member board would be leaving over the next two years, as the electric car company looks to streamline its board, Euronews <a href="https://www.euronews.com/2019/04/20/tesla-to-shrink-board-to-seven-directors-from-11">reports</a>.
Brad Buss, Antonio Gracias, Stephen Jurvetson, and Linda Johnson Rice will not be standing for re-election in the upcoming annual meetings of stockholders in 2019 and 2020, the company said https://www.sec.gov/Archives/edgar/data/1318605/000156459019012123/tsla-8k_20190418.htm in a regulatory filing.
The company said its directors reviewed the composition of the board &#8220;focusing on a phased streamlining of the size of the Board to allow it to operate more nimbly and efficiently.&#8221;
Tesla said the decision did not result from any disagreement between the company and the directors.
Of the four members who would exit the board, Buss and Gracias were part of Tesla&#8217;s disclosure controls committee, overseeing the implementation of the terms of the consent agreement between Tesla and the SEC.
Buss was also the chief financial officer of solar panel installer SolarCity for two years before retiring in 2016. Tesla bought SolarCity that year.
Gracias has been an independent director at Tesla since 2010. Last May, proxy adviser ISS recommended that investors vote against his election to the board and called him a non-independent director.
Jurvetson, the co-founder of Silicon Valley venture capital firm Draper Fisher Jurvetson, is said to be on a leave of absence from Tesla&#8217;s board since allegations of sexual harassment against him arose. Jurvetson has denied the allegations against him. (https://reut.rs/2mn57in)
The proposed changes in the board come a couple of weeks after Elon Musk&#8217;s position as the chief executive officer of Tesla was secured after a federal judge urged the billionaire to settle contempt allegations by the U.S. Securities and Exchange Commission over his use of Twitter.
Musk was sued by the SEC last year for tweeting that he had &#8220;funding secured&#8221; to take the company private. He settled the lawsuit, agreeing to step down as chairman and have the company&#8217;s lawyers pre-approve written communications with material information about the company.
But he was again accused of violating that settlement by sending a tweet about Tesla&#8217;s production that had not been vetted by the company&#8217;s attorneys.
On Thursday, a federal judge ruled that Musk and the SEC would get another week to settle a dispute over Musk&#8217;s use of Twitter.

medium_0-516.jpg

small_0-516.jpg

thumbnail_0-516.jpg

0-516.jpg

Tesla to shrink board to seven directors from 11

Lawyers for Elon Musk and the U.S. Securities and Exchange Commission will square off in a Manhattan courtroom next week over whether the Tesla chief executive should be held in contempt over one of his tweets, VOA news <a href="https://www.voanews.com/a/tesla-s-elon-musk-sec-to-face-off-in-us-court-on-april-4/4849366.html">reports</a>.
U.S. District Judge Alison Nathan scheduled oral argument on an SEC contempt motion for April 4 at 2 p.m. EDT (1800 GMT), after both sides said they saw no need for an evidentiary hearing.
Musk was accused by the SEC of violating his October 2018 fraud settlement with the regulator by tweeting on Feb. 19 to his more than 24 million Twitter followers that Tesla could build around 500,000 vehicles in 2019.
The SEC said that tweet was improper because Musk did not get advance approval from Tesla.
Musk&#8217;s lawyers have said the tweet was not material, and merely restated a target for his Palo Alto, California-based electric car company that he had discussed publicly in January.
John Hueston, a lawyer for Musk, did not immediately respond to requests for comment. The SEC did not immediately respond to a similar request.
The settlement was intended to resolve a lawsuit over a Twitter post last Aug. 7 in which Musk said he had &#8220;funding secured&#8221; to take Tesla private at $420 a share.
It called for Musk and Tesla to each pay $20 million civil fines, and for Musk to step down as Tesla&#8217;s chairman.
Legal experts have said a contempt finding could subject Musk to a higher fine, further restrictions, or even removal from Tesla&#8217;s board or as chief executive.
Tesla shares closed Tuesday up $7.35, or 2.8 percent, at $267.77 on the Nasdaq.
The case is SEC v Musk, U.S. District Court, Southern District of New York, No. 18-08865.

large_Tesla1.jpg

medium_Tesla1.jpg

small_Tesla1.jpg

thumbnail_Tesla1.jpg

Tesla1.jpg

Tesla’s Elon Musk, SEC to Face Off in US Court on April 4

Tesla says it is now taking orders for the long-awaited $35,000 Model 3, will close stores and move to online orders, VOA news <a href="https://www.voanews.com/a/tesla-to-close-stores-take-orders-for-35-000-model-3/4808948.html">reports</a>.
Tesla says it is now taking orders for the long-awaited $35,000 Model 3, a car for the masses that is essential for the company to survive.
The company says to reach the lower price, it&#8217;s shifting all sales worldwide from stores to online only. Some high-traffic stores, however, will remain open.
The company will offer the standard base model, which can go 220 miles (350 kilometers) per charge. It also will offer a $37,000 version with a premium interior that accelerates faster and can go 240 miles (385 kilometers) per charge.
Tesla started taking orders for the Model 3 in March of 2016, but until now hasn&#8217;t been able to cut costs enough to sell them for $35,000 and make a profit.
The cheapest one that could be ordered until Thursday started at $42,900.

Tesla to Close Stores, Take Orders for $35,000 Model 3

<div class="voa-content">
Tesla broke ground Monday on a new factory for its electric cars in China, the first of its factories to be located outside the United States, <a href="https://www.voanews.com/a/china-tesla-opening/4731673.html">VOA</a> reports.
Chief Executive Elon Musk appeared at a ceremony alongside local officials on the outskirts of Shanghai to mark the start of the project. He said the goal is to finish initial construction by summer and start production by the end of the year.
Tesla will build its Model 3 vehicles at the site and says it hopes to eventually have a production capacity of 500,000 vehicles per year. The factory is wholly owned by Tesla, a departure from usual Chinese policy for foreign businesses.
The new factory comes as the United States and China negotiate trade issues that have led each side to impose higher tariffs on the other&#8217;s goods, including the automotive sector.
By having a factory in China, Tesla will not have to worry about consumers there facing higher prices on cars imported from the United States.
</div>

large_9034fa53-4e3e-4d34-aa3b-494c9ef75533_cx0_cy8_cw0_w1023_r1_s.jpg

medium_9034fa53-4e3e-4d34-aa3b-494c9ef75533_cx0_cy8_cw0_w1023_r1_s.jpg

small_9034fa53-4e3e-4d34-aa3b-494c9ef75533_cx0_cy8_cw0_w1023_r1_s.jpg

thumbnail_9034fa53-4e3e-4d34-aa3b-494c9ef75533_cx0_cy8_cw0_w1023_r1_s.jpg

9034fa53-4e3e-4d34-aa3b-494c9ef75533_cx0_cy8_cw0_w1023_r1_s.jpg

Tesla Breaks Ground on Shanghai Factory

<div class="voa-content">
Tesla made about 9,300 more vehicles than it delivered last year, raising concerns among industry analysts that inventory is growing as demand for the companys electric cars may be starting to wane, <a href="https://www.voanews.com/a/could-tesla-price-cuts-mean-demand-is-slowing-/4727401.html">reports</a> VOA News.
If demand falls, they say, the company will enter a new phase of its business. Like other automakers, Tesla will have to either cut production or reduce prices to raise sales. A drop in demand could also curtail the companys earnings and jeopardize CEO Elon Musks promise to post sustained quarterly profits.
On Wednesday, Tesla did cut prices, knocking $2,000 off each of its three models. The company said the cuts will help customers deal with the loss of a $7,500 federal tax credit, which was reduced to $3,750 this month for Tesla buyers and will gradually go to zero by the end of 2019.
They have for a long time had more demand than supply, Gartner analyst Michael Ramsey said. Its becoming apparent that that dynamic is changing.
Tesla reported that it produced 254,530 cars and SUVs last year and delivered 245,240.
The companys deliveries for the full year matched Wall Street estimates, but its figures for the fourth quarter didnt reach expectations. Tesla said it delivered 90,700 vehicles from October through December. Analysts polled by data provider FactSet expected 92,000.
Jeff Schuster, a senior vice president at the forecasting firm LMC Automotive, said demand for Teslas lower-priced Model 3 has been artificially high for the past six months as the company overcame production problems at its Fremont, California, factory.
Youve had these inflated months because of delayed deliveries, Schuster said. Were probably getting to that point where were getting to equilibrium and consumers arent necessarily waiting for vehicles.
Last year, Tesla reported that about 420,000 buyers had put down $1,000 deposits to join the Model 3 waiting list.
LMC predicts that Tesla U.S. sales will rise in 2019 because its the first full year on the market for the Model 3. It anticipates sales to then fall by about 10,000 in 2020.
Losing the tax credit will hit those who have been holding out for the $35,000 version of the Model 3, Schuster said. At present, Tesla is selling only versions that cost at least $44,000. Under federal law, buyers get the full tax credit until a manufacturer reaches 200,000 in sales since the start of 2010. Tesla hit 200,000 in July but the full credit continued for vehicles delivered by Dec. 31. It was cut in half on Jan. 1 and will go away by the end of the year.
Youve had your early adopters, those early followers have already come in to buy, Schuster said. Now youre trying to appeal to the mainstream market. I think that will have an impact on overall demand.
At the same time, inventory appears to be rising. The company parked hundreds of cars at lots and Tesla stores all over the country at the end of last year, which could indicate excess stock. Tesla wouldnt give inventory numbers but said it has lower stocks than its two biggest competitors, BMW and Mercedes.
The Associated Press found one lot on the north side of Chicago where Tesla was storing dozens of vehicles in late December, and Mark Spiegel, a hedge fund manager who bets against Tesla stock, said other lots were full across the country.
Tesla said it sometimes stores vehicles on lots as theyre being shipped to company dealerships across the nation. The lot in Chicago has fewer cars on it now, the company said. Our inventory levels remain the smallest in the automotive industry, the company said Wednesday.
Tesla also says Model 3 sales should grow worldwide as it expands distribution and begins to offer leases. Deliveries in Europe and China will start in February, and a right-hand-drive version is coming later in the year, the company said.
In addition, inventory dropped in the fourth quarter as Tesla delivered a few thousand vehicles more than produced.
Tesla said it had about 3,000 vehicles in transit to customers at years end. But even with that number, Schuster said production still exceeded deliveries, which doesnt fit Teslas business model of building cars when they are ordered by customers. Still, even at 9,300, Teslas inventory is smaller than other automakers that have to stock dealerships, Schuster said.
</div>

large_397d68e0-1eaf-4893-99bf-68b4c252b8af_w1023_r1_s.jpg

medium_397d68e0-1eaf-4893-99bf-68b4c252b8af_w1023_r1_s.jpg

small_397d68e0-1eaf-4893-99bf-68b4c252b8af_w1023_r1_s.jpg

thumbnail_397d68e0-1eaf-4893-99bf-68b4c252b8af_w1023_r1_s.jpg

397d68e0-1eaf-4893-99bf-68b4c252b8af_w1023_r1_s.jpg

Could Tesla Price Cuts Mean Demand is Slowing?

<div class="voa-content">
Shares in Tesla dropped as much as 9 percent on Wednesday on worries of future profitability, after the electric car maker cut U.S. prices for all its vehicles to offset lower green tax credits, while falling short on quarterly deliveries of its mass-market Model 3 sedan, <a href="https://www.voanews.com/a/tesla-shares-drop-on-price-cut-disappointing-model-3-deliveries/4726212.html">reports</a> VOA News.
Analysts questioned whether the $2,000 price cut on all models signaled lowered demand in the United States, and ultimately whether the move would undermine nascent profitability at the Silicon Valley automaker, which has never posted an annual profit.
&#8220;In our view, this move could suggest that what many bulls assume to be a substantial backlog &#8230; for Tesla may be less robust,&#8221; wrote Bank of America analyst John Murphy in a client note.
Chief Executive Elon Musk, who has often set goals and deadlines that Tesla has failed to meet, surprised investors by delivering on his pledge to make Tesla profitable in the third quarter, for only the third time in its 15-year existence. But the company is unprofitable for the first nine months of 2018, and cash flow remains a concern for investors.
Pressure to deliver on promise
Musk has been under intense pressure to deliver on his promise of stabilizing production for the Model 3, which is seen crucial for easing a cash crunch and achieving long-term profitability. It said it was churning out almost 1,000 Model 3s daily, broadly in line with Musk&#8217;s promises but slightly short of Wall Street expectations.
The company said it would begin delivering Model 3s to Europe and China in February.
The price cut of $2,000 beginning on Wednesday on the Model 3 — as well as on its higher-priced Model S and Model X — took the market by surprise and weighed on the stock, pushing it down 9.4 percent in morning trade. Shares were last down 6.7 percent at $310.48.
The price cut comes as automakers expect U.S. new vehicle sales to weaken in 2019, and increased competition from new electric vehicle entrants. Tesla sales benefited from a $7,500 federal tax credit on electric vehicles throughout 2018, but that full credit expired at the end of 2018, and new buyers will now receive only half that amount.
Under a major tax overhaul passed by the Republican-controlled U.S. Congress in 2017, tax credits that lower the cost of electric vehicles are available for the first 200,000 such vehicles sold by an automaker. The tax credit is then reduced by 50 percent every six months until it phases out.
&#8220;The price cut is what&#8217;s driving the stock lower, as it openly acknowledges the sunset of subsidy dollars is a material headwind,&#8221; said Craig Irwin, an analyst with Roth Capital Partners.
But some said fears of eroded demand were overblown. Gene Munster of Loup Ventures calculated that the lowered tax credit equaled, on average, to a 3-percent discount on a Tesla. If Tesla had a demand issue, therefore, the company would have cut its prices by more than 3 percent, he wrote in a note.
Also on Wednesday, General Motors said it had sold its 200,000th electric vehicle in 2018, similarly triggering a phase-out of the federal tax credit, according to a source.
Effect on profit?
Hargreaves Lansdown analyst Nicholas Hyett estimated in a client note that if Tesla continues to deliver cars at the current rate, the price cut will mean $700 million in lost revenue in 2019.
Wedbush analyst Daniel Ives, meanwhile, said the price cut was &#8220;a potential positive&#8221; for demand, &#8220;but not what the bulls wanted to hear on the impact to profitability and ultimately the bottom line.&#8221;
Tesla delivered 63,150 Model 3s in its fourth quarter, falling short of FactSet estimates of 64,900. Tesla said that based on its own compilation of analysts&#8217; forecasts, its delivery numbers were in line with market expectations.
Bank of America analyst John Murphy wrote that the numbers were in line with market consensus, though below the bank&#8217;s estimate of 71,500 Model 3s.
Deliveries rise, forecasts missed
Total deliveries rose from the third quarter to 90,700 cars, but missed forecasts, which had been influenced by analysts&#8217; expectations of a surge in buyers looking to cash in on the tax credit before year-end.
The automaker&#8217;s third-quarter pre-tax profit was around $3,200 per vehicle delivered, but for the first nine months of 2018 the company suffered a third-quarter loss per vehicle delivered of $8,019, according to Reuters calculations.
Overall, total production rose 8 percent to 86,555 vehicles. The company churned out 61,394 Model 3s, up from a total of 53,239 Model 3s in the third quarter.
&#8220;Tesla disappointed the market. The deliveries are below our estimates and the consensus estimates. I don&#8217;t expect that Tesla operates in the black in 2019,&#8221; said Frank Schwope, an analyst with NORD/LB.
</div>