Tesla losses spike as it fights to ramp up Model 3

Ann Santiago
February 8, 2018

"Our prior experience on the Model 3 ramp has demonstrated the difficulty of accurately forecasting specific production rates at specific points in time", Tesla said in a letter to investors Wednesday.

The company released its Q4 2017 result on Wednesday night in the United States, reporting negative free cash flow of $276.8 million - the lowest in more than a year - and $675 million in losses attributable to shareholders; notching up nearly $2 billion in losses for the whole year.

Musk, who operates a Tesla design center in Hawthorne, suggested the achievement should instill faith in production of the Model 3 sedan, its bid for the mass market.

Speaking to analysts on Wednesday night, Musk said that 2017 had been "on balance, a phenomenal year", with the launch of the company's first mass production auto, the Model 3; the unveiling of the Tesla Semi; and the installation of the world's biggest lithium-ion battery right here in Australia. "So to test it, Elon Musk sent up his own Tesla convertible with a dummy astronaut at the wheel, blasting David Bowie's "Life on Mars.' That's right, this is absolutely true: A giant phallus cranking rock 'n" roll, releasing a red convertible into the dark void - and the award for Most Midlife Crisis goes to Elon Musk". The automaker is struggling to meet production targets for its first mass-market vehicle, the Model 3 sedan. Musk said in July a year ago that Tesla would probably be making 20,000 Model 3s per month by December 2017.

"The competitive strength of Tesla long term is not going to be the auto (s), it's going to be the factory, we're going to productise the factory", he said.

In January this year, Tesla braced investors for a much lower production and delivery rate of Model 3s.

Still, the fact that Tesla didn't further delay the production goal for the Model 3 "should be taken positively", CFRA's Levy said in his note. In total, the company said it had produced 2,425 Model 3s in the fourth quarter.

Attention to Model 3 bottlenecks and the battery units should lead to "significantly" increased production through the first half of this year, Tesla said. "The timeline to do that remains murky".

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