Tesla reports Q1 earnings: Wide loss during logistical challenges

Tesla’s (NASDAQ:TSLA) first-quarter earnings for 2019 saw the California-based electric car maker fall short of Wall Street’s revenue estimates after posting $4.5 billion in revenue. Additionally, the company missed analysts on the bottom line by a wide margin with a GAAP loss of $702 million. In the fourth quarter of last year, the company posted a GAAP profit of $139M on revenue of $7.2B, representing a revenue drop of 37% in the first quarter.

The results, which were disclosed shortly after the closing bell on Wednesday, April 24, showed third-quarter loss of $2.90 per share on an adjusted basis, missing analyst estimates of -$.69 per share, per Refinitiv. Revenue was $4.54 billion versus an estimate of $5.2 billion.

DON’T MISS: Join us LIVE on Tesla’s Q1 earnings call with Elon Musk

During the quarter Tesla underwent several restructuring changes, the company reported a $67M charges due to the changes. Tesla reported that demand of the Model S and X fell significantly in the first quarter, largely due to “seasonality”, the reduction in US tax credits, and the discontinuation of the 75kWh battery pack.

The company revealed for the first time that Model 3 production has moved from customized orders to batch production. This change, which is different than the production of the Model S and X, leaves Tesla with more inventory until the vehicle variants are sold.

Gross margins for Tesla’s vehicles dropped across the board, from 24.3% to 20.2% on a GAAP basis. Tesla attributed this change to the price reduction and reduced deliveries on the Model S and X and lower cost variants of the Model 3 hitting the market. Tesla stated that they continue to strive for a 25% gross margin on a combination of all three vehicles. To spur increased demand for their high-priced Model S and X, the company launched refreshed platforms with the longest range of any electric vehicle on the market.

Gigafactory 3

The company is still expecting to reach volume production at its third Gigafactory in Shanghai, China by the end of 2019. “If our Gigafactory Shanghai is able to reach volume production early in Q4 this year, we may be able to produce as many as 500,000 vehicles globally in 2019,” the letter stated.

In addition to bringing the factory online by the end of the year, Tesla believes they have made significant headway into improving efficiencies at the forthcoming facility. “Learning from our experience, we can now build a second-generation Model 3 line in China that we expect will be at least 50% cheaper per unit of capacity than our Model 3-related lines in Fremont and at Gigafactory 1. Our Model Y manufacturing capacity will have the same simplicity as the line planned for Gigafactory Shanghai.”

Tesla’s cash position declined from $3.7B to $2.2B in the first quarter, with the majority of the drop can be attributed to the repayment of a $920M convertible note. Tesla expects to turn a profit again in Q3 of 2019, while reducing losses in the second quarter.

Tesla’s stock was down 1.99% for the day and is now flat after hours in the moments after Tesla reported earnings.

You can read the full Q1 shareholder letter here.