Tesla reported quarterly earnings and revenue that missed analysts’ expectations on Wednesday.
Here’s how the company did compared with what Wall Street expected:
- Losses: -$.3.06 per share vs. -$2.92 per share forecast by Thomson Reuters
- Revenue: $4.00 billion vs. $3.96 billion forecast by Thomson Reuters
Automotive gross margins increased to 20.6 percent. Model 3 gross margins turned slightly positive in the second quarter and Tesla expects Model 3 margins to be 15 percent in the third quarter.
This quarterly update is a crucial one for Tesla. Investors have growing concerns about the sustainability of Tesla’s profits, the reported quality problems with its cars, and overall demand for the Model 3, which is the company’s biggest bet by far.
The electric car maker reached a milestone last month, announcing that it is making roughly 5,000 Model 3 sedans every week — halfway to its goal of 10,000. Production, though, is many months behind schedule and the company has resorted to setting up assembly lines in temporary tent structures.
There are also concerns about quality issues with the cars. Current and former employees have complained that Tesla is producing a high ratio of flawed parts and vehicles as it rushes to ramp up output.
Investors will also be watching to see how much cash Tesla is going through. It’s been burning cash at a rate of nearly $1 billion per quarter, and it is expected to need more with recent reports the company is planning to build factories in China and Europe.
Many analysts think the company will have to raise fresh capital by the end of the first quarter of 2019. Tesla seems to have taken another step toward getting its finances in line by recently hiring a new chief accounting officer.
Tesla has also courted controversy in recent months due to the erratic behavior of Chairman and CEO Elon Musk. On a conference call discussing its first-quarter earnings, he called questions posed by analysts “boring, bonehead questions,” and more recently caused a stir with some off-color comments on Twitter. Some investors worry Musk’s online presence risks alienating fans and potential customers, and distracts investors and employees from Tesla’s basic goals.
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