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Automotive

Tesla posts huge loss, but Model 3 becomes a moneymaker as production picks up

By Nick Lavars
August 02, 2018
Tesla posts huge loss, but Model 3 becomes a moneymaker as production picks up
Tesla says gross margin on the Model 3 has turned from slightly negative to slightly positive
Tesla says  gross margin on the Model 3 has turned from slightly negative to slightly positive
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In the final week of June, Tesla produced a total of 7,000 Model 3, Model S and Model X vehicles
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In the final week of June, Tesla produced a total of 7,000 Model 3, Model S and Model X vehicles
To say Tesla’s production of its much-hyped Model 3 was slow out of the blocks could be putting it mildly
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To say Tesla’s production of its much-hyped Model 3 was slow out of the blocks could be putting it mildly
Tesla says gross margin on the Model 3 has turned from slightly negative to slightly positive
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Tesla says  gross margin on the Model 3 has turned from slightly negative to slightly positive
Tesla says gross margin on the Model 3 has turned from slightly negative to slightly positive
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Tesla says  gross margin on the Model 3 has turned from slightly negative to slightly positive
To say Tesla’s production of its much-hyped Model 3 was slow out of the blocks could be putting it mildly
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To say Tesla’s production of its much-hyped Model 3 was slow out of the blocks could be putting it mildly
View gallery - 5 images

To say Tesla's production of its much-hyped Model 3 was slow out of the blocks could be putting it mildly, but it looks like things are starting to pick up for the debut mass market sedan. The company is now pumping out the vehicle in unprecedented numbers, and is eying sustainable profitability for the first time in its 15-year history.

Hundreds of thousands of customers preordered the Tesla Model 3 following its launch in April 2016, so meeting the huge demand was always going to take time. But after originally planning to produce 20,000 a month by December 2016, the company has been beset by continual production bottlenecks that have turned out underwhelming numbers.

It produced 260 cars in Q3 last year, followed by 1,542 in Q4, and shipped 9,766 in Q1 of this year. In February, the company targeted a Model 3 weekly production rate of 5,000 by the end of Q2.

It may have just missed the cutoff, but in the month of July, the company claims to have pumped out 5,000 Model 3s per week on multiple occasions. Its stated aim is to build that up to 6,000 per week by late August, and then onto 10,000 per week sometime next year. Overall, it expects to produce 50,000 to 55,000 per week in Q3.

Tesla has posted some big losses this year, and nothing changes this time around with a total US$718 million net loss attributable to shareholders (this followed $710 million in Q1 and $675 million in Q4). On the plus side, revenue is also on the up, with the company raking in $4 billion in Q2 compared to $3.4 billion in Q1 and $2.8 billion in the same quarter of 2017.

This together with "dramatic" savings in production due to things like lower labor hours per unit and lower material costs has the company optimistic about its financial outlook. It says gross margin on the Model 3 has turned from slightly negative to slightly positive.

In the final week of June it produced a total of 7,000 Model 3, Model S and Model X vehicles, and it says a total vehicle output of 7,000 per week, or 350,000 per year, would see it become a profitable operation.

"It took 15 years to execute on our initial goal to produce an affordable, long-range electric vehicle that can also be highly profitable," reads the letter signed by CEO Elon Musk and Chief Financial officer Deepak Ahuja. "In the second half of 2018, we expect, for the first time in our history, to become both sustainably profitable and cash flow positive."

Source: Tesla

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AutomotiveTeslaElectric VehiclesTesla Model 3
8 comments
Nick Lavars
Nick Lavars
Nick has been writing and editing at New Atlas for over six years, where he has covered everything from distant space probes to self-driving cars to oddball animal science. He previously spent time at The Conversation, Mashable and The Santiago Times, earning a Masters degree in communications from Melbourne’s RMIT University along the way.

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8 comments
SimonClarke
Tesla has produced a brand new car on a brand new production line quicker than most car companies can create their next model. Yes it has slipped past some of it's own targets but without targets you cannot achieve anything.
so, down to the real numbers. The number 2 best selling car in America is a Mercedes, I can't remember which one, but they sold 6,200 or there about. the Model 3 sold 16,000, and they haven't finished ramping up to full production speed yet. People need to stop being negative about Tesla and start to follow their lead.
Daishi
Even before launching the Model 3 Tesla had around a 60% year over year growth rate which requires a huge manufacturing capacity increase each year. It has been a long road to get to 7,000 vehicles/week but their growth rate will eventually taper off because they are now a large scale automotive company. That should mean the costs of growing by that much each year would taper off with it. This is part of why so many investors see their losses and shrug. The need to expand manufacturing capacity by 60% each year isn't a terrible problem to have.
andy68
Teslas stated purpose is not to make profits, but to accelerate the transition to all electric transport. It needs to make a profit to achieve that aim, but all it's efforts have been put into continual growth and expansion, and increased production of increasingly desirable and affordable cars.
Far from being "slow" as suggested in this article. their only failure is to meet their own sometimes almost impossible targets. The levels of production they have reached with a new model on a new production line far exceed anything managed by the established auto-makers.
The model 3 is not only the best selling EV in the US , but the best selling car in its class full stop. -
https://cleantechnica.com/2018/08/01/tesla-model-3-sales-skyrocket-us-toyota-camry-prius-sales-plummet-coincidence
EZ
I still don't see the environmental benefits of driving electric cars. It takes nasty CO2 creating oil and natural gas to make the juice. The only way this is ever going to change is by us consumers getting the knowledge that the original Tesla had, which our elitist government controlled "defense agencies" have buried in some obscure guarded vault. Unfortunately, that will never happen.
SimonClarke
If I can just comment on EZ's post, even if electricity is made using fossil fuels, it is still a lot more efficient than a petrol or diesel engine. To transform crude oil into petrol or diesel takes a huge amount of electricity, that is before you get to pour the fuel into your car. America typically gets 50% of it's electricity from renewables, the UK is heading towards 30% but during the last few weeks we have been closer to 100% as the UK bakes in a clear sky summer.
Here is another way of looking at it. You install solar panels and a house battery to your property and charge your electric car from the energy that you produce. How about that for being green?
Of course if we want to be truly green, we have to walk everywhere
Pierre Collet
@EZ: Not true for France, where nearly 80% of the need for electricity is covered by nuclear power plants (it would be impractical to go beyond 80% because of the lag of nuclear power plants, making them incapable to meet peak power demands, that still need to be addressed by fossil fuel plants): https://en.wikipedia.org/wiki/Nuclear_power_in_France
So in France, electricity really is 80% "green" air-pollution and greenhouse gasses wise (this does not take into account nuclear waste, of course, but this is not an air pollutant).
grtblu
Once the market for EV develops and people actually buy them, in will come volkswagon and all the other major players. what exactly is Musk's strategy to stay alive after the big boys jump in?
warren52nz
In today's news they announced that a Saudi Arabia company has been named as the bidder to buy Tesla outright. I wonder what their motive is? 1) To gear themselves up for the inevitable drop in demand for fossil fuels or 2) To try to squash electric vehicle technology