Tesla loses due to failure to meet European and Chinese demand for Model 3
Tesla has made a hefty loss of $702 million. This was caused by a significant drop in the number of Tesla models delivered, as a result of logistical problems. The company couldn’t meet the demand for the Model 3 fast enough, especially in Europe and China.
Elon Musk speaks during a verbal explanation of the presented quarterly figures about “the most difficult logistics problem I have ever seen, and I have seen some difficult cases.” Tesla’s new CFO Zach Kirkhorn chimed in, calling the quarter “one of the most complicated quarters in the company’s history.”
Demand for the Model 3 was particularly high in Europe and China. This past quarter was the first time the Model 3 was shipped outside of the US and presented some challenges for the supply chain. As a result, the company was unable to get the vehicles to their customers on time. This is related to the fact that the Model 3, unlike the X and S, is not made to order; Due to the higher volumes, the Model 3 is built in several versions in larger batches, after which they are matched to orders. In addition, the Teslas largely come from a single factory in the American Fremont and with the international expansion of the Model 3, that resulted in longer delivery times, according to Tesla.
Musk explains that half of all worldwide deliveries from the past quarter took place in the last ten days of the quarter. That means a large portion of vehicle shipments will roll over into Q2 2019 results, which Musk points to as the main driver for the current negative result. Tesla announced earlier this month that deliveries would reach 63,000 in the first quarter of this year. That is more than double compared to the same quarter in 2018, but also 31 percent lower than the number of deliveries in the last quarter of 2018.
The Model S and X, in particular, did not perform well in the past quarter. In total, 12,100 of these vehicles were delivered, compared to 27,550 in the fourth quarter of 2018. Significantly fewer Model S and X units were also produced, down from 25,161 to 14,150. Tesla attributes this to, among other things, the discontinuation of the 75 kWh battery option, a limitation of US subsidies for electric cars and price adjustments. Due to the change in prices, demand for the more expensive performance version of both models grew faster than the company could meet.
The Model 3 continues to do well and was by far the best-selling premium car in the US, for example. In the past quarter, the Model 3 made up the lion’s share of the 63,000 Teslas delivered; approximately 50,900 Teslas delivered were a Model 3. The company is sticking to its target of delivering 360,000 to 400,000 cars throughout 2019; the number of cars actually produced will be higher than these numbers.
Turnover was $4.5 billion. That is more than the $2.6 billion from the same quarter a year earlier, but also significantly less than the $7.2 billion in revenue from the fourth quarter of 2018. Tesla expects it to reach between 90,000 and 100,000 in the second quarter. can supply cars. Even then, no profit will be made, although the loss will be smaller than the $702 million from the past quarter, the company reports. The manufacturer expects profits to be made again in the third and fourth quarters.