Tesla reported the worst loss in its brief history on Wednesday — but in a conversation with analysts and reporters, CEO Elon Musk made that seem like little more than a speed bump, spending much of a 75 minute call laying out grand plans for the company's future and dismissing analysts questions as "bonehead" and "boring."
Musk's plans include developing a fully autonomous version of its Autopilot system and a compact Model Y sport-utility vehicle. Musk also hinted at building future factories, including at least one in China.
Known for his unbridled confidence, it nonetheless stood in sharp contrast to the problems the company has been having: Production delays with the Model 3 were largely responsible for a record first quarter loss of $784.6 million, double the deficit of $397.2 million a year ago.
Launched last July, the Model 3 was intended to transform Tesla into a mainstream player, and the company quickly lined up more than 400,000 advance reservations. But Tesla’s Fremont, California assembly plant has been stuck in what Musk has described as “production hell,” rolling out only a fraction of the finished vehicles once promised. Some reservation holders have reportedly canceled planned purchases.
But during the call, Musk downplayed what he recently described as a “time shift” in Tesla’s production schedule, while insisting, “The thing I’m most excited about is the rapid increase in output” of the Model 3. “Production is improving dramatically,” he added, “exponentially, in fact.” It hit just over 2,000 at the end of March and the goal is to now reach 6,000 by mid-year.
As it gets back on track, Musk continued, “I am definitely confident” Tesla will not only be in the black and delivering positive cash flow by year-end but delivering 20 percent profit margins.
It will need the cash to meet the ambitious product plans to follow, starting with the Model Y. Tesla has been vague about the timetable for that electric SUV, with some reports speculating it could launch in 2019. Musk corrected that, saying, “it’s probably closer to 24 months from now.”
The battery-SUV could prove even more critical than Model 3 in a market where SUVs are rapidly replacing sedans as the vehicle of choice, especially in the luxury segment.
Where the Model Y will be built “has not been decided,” Musk said, noting the Fremont factory, one of the country’s biggest auto assembly plants, is “jammed to the gills,” or at least will be, once production gets up to target.
So, that is likely to set off a race by states hoping to land that plum investment, much as happened when Tesla went searching for a site for the Gigafactory battery plant that ultimately landed in Reno, Nevada. It appears the Model Y factory may actually become Tesla’s third assembly plant, as Musk also revealed that talks are well underway with Chinese regulators to build a factory there, in the world’s largest luxury vehicle market.
Significantly, what goes into China will combine the functions of both the Gigafactory and the Fremont plant. All future factories, Musk explained, will produce both batteries and vehicles.
Meanwhile, he declared that the problems that have crippled production of the Model X will yield dramatic improvements in the Model Y. “No question we could have made the Model 3 easier to manufacture than we did,” he said. “I think Model Y will be a manufacturing revolution…because we don’t want to go through the same pain again.”
Tesla’s to-do list also includes an update of its semi-autonomous Autopilot technology. A planned, fully hands-free version, “from a technical standpoint,” he suggested, “might be ready by the end of next year.”
At several times during his long conference call, Musk turned from upbeat to prickly, several times cutting off questions he declared “boring.” At times, sounding almost like President Donald Trump, whom Musk briefly worked with on a short-lived economic advisory panel, he also shot back at those who questioned the safety of Tesla’s Autopilot system — which was activated during a recent fatal crash of a Model X SUV.
“It’s really incredibly irresponsible for any journalist with integrity to write an article that would lead people to believe that autonomy is less safe — which might lead people to turn it off and then die,” Musk declared.
Tesla will move forward on the development of Autopilot, he said, asserting that autonomous vehicles will eventually deliver a sharp reduction in the crashes that are estimated to kill as many as 1.25 million people a year worldwide.