Tags: tesla | earnings | cash | musk | model 3

Tesla Burns Through Less Cash Than Expected as Model 3 Arrives

Image: Tesla Burns Through Less Cash Than Expected as Model 3 Arrives
(Getty/Jerry Lampen)

Wednesday, 02 Aug 2017 04:50 PM

Tesla Inc. burned through less cash than analysts expected before bringing out its most affordable model yet, as costly investments strain the balance sheet of the electric-car company led by Elon Musk.

The maker of Model S sedans reported negative free cash flow of $1.16 billion in the second quarter in a letter to shareholders Wednesday, less than the $1.3 billion projected by analysts.

The burn rate was still a quarterly record and almost doubled the amount of money Tesla went through in the first three months of the year.

Musk spent heavily leading up to last week’s roll out of the Model 3, a sedan that starts at $35,000 and has racked up more than half a million reservations. Tesla has been making costly investments to ramp up car and battery manufacturing, expand customer service operations and build out its network of recharging stations to execute the chief executive officer’s mission to transition the world to electric vehicles and sustainable energy.

“How egregious the cash flow is will be topical for investors,” Jeff Osborne, a Cowen & Co. analyst, said in an interview Wednesday before Tesla reported results. “What has to happen to go from hand-building 50 cars to making 5,000 a week?”

Tesla had more than $3 billion in cash on hand at the end of the latest quarter. The Palo Alto, California-based company has had little trouble drawing investor interest in funding Musk’s ambitions, with optimism about the Model 3’s prospects contributing to a 53 percent jump in its stock price this year.

The shares rose 2.5 percent to $334.06 as of 4:35 p.m. Wednesday, after the close of regular trading.

Spending Forecast

Tesla forecast spending $2 billion in capital expenditures in the second half of the year, up from $1.5 billion in the first six months of the year. The company said it expects to deliver more Model S and Model X vehicles in the second half than the first, without providing a specific target.

Musk handed over the first 30 Model 3s to employees on Friday and said the company had produced 20 more for engineers to test. Tesla’s goal is to build 100 of the cars in August and more than 1,500 in September, then ramp up to a targeted rate of 20,000 a month in December. The CEO said pulling off those plans will be “production hell” for workers at Tesla’s lone car assembly plant in Fremont, California.

Since the handover event, Tesla said it’s averaging more than 1,800 net Model 3 reservations per day.

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Tesla Inc. burned through less cash than analysts expected before bringing out its most affordable model yet, as costly investments strain the balance sheet of the electric-car company led by Elon Musk.
tesla, earnings, cash, musk, model 3
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2017-50-02
Wednesday, 02 Aug 2017 04:50 PM
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