The roof fell in on Tesla Wednesday afternoon. Financially. TSLA lost $702 million in the first quarter, 2.5x what Wall Street expected. Tesla sold 31 percent fewer vehicles in Q1 2019 compared with the monster Q4 2018 as Tesla’s full $7,500 tax credit was about to expire. It had 40 percent less cash on hand than at the end of 2018. Tesla’s claimed return to profitability was pushed back from Q2 to Q3 2019. Apart from problems selling cars, sales at Tesla’s linked solar operation was off 35 percent.
All this money talk has zero impact on how cool Teslas are. But it could impact how much money Tesla has to develop and build newer cars such as the pending Model Y affordable crossover/SUV. Tesla’s sagging stock price also affects its ability to attract talented engineers and marketers. Multiple quarters like this and Tesla becomes takeover bait.
Tesla affirmed guidance (a Wall Street term) of about 400,000 deliveries this year. Once again, Tesla said production in 2019 will be greater than deliveries by a significant amount. Tesla has rolled out this logic for several of the last quarters, as if somehow thousands of additional cars are stuck in transit on ships and transporters at the ends of March, June, September, and December. CEO Elon Musk said the China market has both potential (1.4 billion population) and peril (building factories, government approvals, etcetera).
Demand for Tesla’s premium vehicles was especially hard hit this quarter, with the Model S sedan and Model X crossover down a combined 56 percent. Musk said, however, that it isn’t because the Model 3 is cannibalizing sales. He said only about 3 percent of trade-ins on Model 3 sales are from larger Teslas.
Tesla said it delivered 63,000 vehicles in the first quarter. It projected deliveries of 90,000-100,000 this quarter and 360,000-400,000 for the year.
Of concern for Tesla at the high end of the market are signs that competing EVs are beginning to grab market share, especially Audi and Jaguar. In countries with new-car registration data available daily, “April [got] off to a horrible start for Tesla,” writes analyst Anton Walhman in Seeking Alpha. “Compared to March, the daily sales rate in Norway in April thus far is down 82 percent, and in The Netherlands it’s down 76 percent. For the more expensive and higher-margin Model S and X, Tesla is losing market share to Audi and Jaguar’s electric cars in the most dramatic of ways. Audi eTron and Jaguar i-Pace are outselling Tesla Model X and S combined by a factor of 5.7 to 1 in Norway, and 9.7 to 1 in The Netherlands.”
Those are smaller countries and Norway is an anomaly because incentives have driven battery-electric vehicles to more than half of all sales. That’s in a country (Norway) with virtually no taxes on EVs and heavy taxes on combustion-engine vehicles. The US is different because of its lower population density except on the coasts, modest (and expiring in nine months) tax credits for Tesla buyers, and fuel prices half that of most European countries. In comparison, in the US, electric vehicles amount to 2 percent of all sales; add in hybrids and it’s 4 percent of sales. Electric cars may be a good thing long-term, but so far the majority of US buyers are happy pumping gas, not plugging into electrical outlets. Tesla has the majority of the market in the US, but it can’t keep continuing soft quarters like the one just ended.
Tesla started the week with an upbeat presentation on automation Monday, saying will have full self-driving by 2020 along with the ability for owners to rent out their Teslas as robo-taxis. But many experts scoffed at Tesla’s timeline and Musk’s distaste for lidar, one of the vehicle positioning tools other automakers use, along with the radar and cameras Tesla uses. As Therese Poletti wrote in MarketWatch:
Tesla Inc.’s autonomous-driving showcase was riddled with so many pie-in-the-sky statements and inaccuracies that Chief Executive Elon Musk looks more like a huckster car salesman than the “genius” that his fans declare him to be. .. Musk likes to present Tesla as a new kind of car company, but with this display, he fits right into the stereotypical view of car dealers: Willing to say whatever it takes to get you to spend thousands of dollars on their cars. It is irresponsible and reprehensible, but what do you expect from a car salesman?