Tesla CEO Musk Boldly Claims Automaker Will Be Profitable In Q3 2018

Elon Musk

APR 13 2018 BY ERIC LOVEDAY 66

Tesla CEO Elon Musk once again took to Twitter to counter a media claim that Tesla would need to raise up to $3 billion in funding this year.

Musk apparently took offense to the statement from The Economist, so he offered up this response:

“The Economist used to be boring, but smart with a wicked dry wit. Now it’s just boring (sigh). Tesla will be profitable & cash flow+ in Q3 & Q4, so obv no need to raise money.”

He’s saying the automaker will be profitable in both of the last two quarters of this year, a statement most financial analysts disagree with.

Related – Tesla Q1 Production Soars To New High Of 34,494 – 9,766 Model 3

However, this isn’t the first time Tesla has stated it won’t need to raise funds this year. In fact, just recently in its Q1 sales release, Tesla had this remark:

“Given the progress made thus far and upcoming actions for further capacity improvement, we expect that the Model 3 production rate will climb rapidly through Q2. Tesla continues to target a production rate of approximately 5,000 units per week in about three months, laying the groundwork for Q3 to have the long-sought ideal combination of high volume, good gross margin and strong positive operating cash flow. As a result, Tesla does not require an equity or debt raise this year, apart from standard credit lines.”

Cash flow positive relies heavily on Tesla Model 3 production volume hitting 5,000 units per week. Musk expects that to happen sometime this Summer, perhaps in July. If that happens and Tesla becomes profitable, then perhaps the doubters will no longer doubt.

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66 Comments on "Tesla CEO Musk Boldly Claims Automaker Will Be Profitable In Q3 2018"

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Doggydogworld

He’s doubling down, previously he said operating cash flow positive. Run the numbers even with Tesla’s optimistic volume and margin forecasts, and they still show a loss.

We’ll see.

Vexar

Well, this is easy to hit for two quarters: don’t make any more capital investments. All they really need to do is keep building PowerWalls and PowerPacks, do more than a showpiece of effort installing the solar roof products, and focus on manufacturing.

The problem I see is they likely want to get that Chinese factory up and running now that the trade war with China has made Tesla off-limits (and I’m sure Chinese are happy about that), and I can’t see them delaying just for a profitability objective.

They could also slow the development of the Model Y.

Pushmi-Pullyu

Given that it takes about two full years to build a factory and fine-tune it for mass production, it seems to me that Tesla should be getting ready to build their planned new auto assembly plant in China (or Eastern Europe, or wherever) very soon, or should be buying an existing one they can renovate.

If Tesla really does p plan to put the Model Y into production in 2020, as was recently rumored, then they can’t sit around minimizing expenses for a quarter or two, just so they can point to a profitable-on-paper quarter. They are going to need that second assembly plant for the Model Y.

The need for a second assembly plant is just one of several reasons why I am quite skeptical that Tesla can pull off a net profitable quarter during this year. Not saying it’s impossible, but I will be quite surprised if it happens.

BenG

Well, Tesla obviously has a long way to go to manufacture 5,000 Model 3 per week. That is their intense focus for the foreseeable future. Elon says they are aiming for that figure in about 3 months, so about July, but we all know how Elon operates: that’s their goal in a perfect world and there will inevitably be delays. I’d be very surprised if they hit 5,000/week in July. Probably slip at minimum a month or two, quite possibly 3-6 months.

So, I’m skeptical of their hitting profitability in Q3, but not because they are “sitting around”, but because they have their hands full trying to make the Model 3 line perform at full capacity.

HH

Pushmi-Pullyu is still right. If they plan to build the Model Y in Fremont on a second line, this would mean that they have given up on their goal to build out Model 3 production to 10K/week. Fremont does not have the capacity for more. If Model Y will be produced there, this would mean less Model 3.

Locations for Gigafactories 3, 4 and 5 were supposed to be announced by December 2017. Over a quarter later, we are still waiting. This is key for Tesla’s long term growth. Even if they started building a Model Y factory now, this would still mean they are only coming to market when several other competitors have arrived with their equivalent offerings already.

The ironic problem is that … Tesla is developing its portfolio too slowly. They need more models and faster. They need more factories fast. They don’t have the luxury to wait until Model 3 production works to start laying the groundwork for Model Y. This has to happen NOW.

Nix

Tesla has already broken ground on a massive expansion to Fremont. This is above and beyond the expansion already completed for the Model 3.

mx

Wall Street is Red Jelly.
This is what you can be when you Seriously Run a Company for Innovation and the GOOD OF SOCIETY.
LOL. No one on Wall Street is genetically capable of that.

Oswald

Wall Street very much approves of Tesla, how do you think they got that stock price? TSLA isn’t trading at the farmers market.

ffbj

Not really it’s more like a 3-way split 1/3 say buy, hold, or sell.

realistic

Tesla EXISTS because of Wall Street.
Period.
Your remark reflects zero understanding of how Musk has magnaged to amass $B of personal wealth while running a business that has burned $1B in Operations ALONE (that’s BEFORE a single penny of CapEx, interest, underwriting fees, etc) with an accumulated deficit of $5B. You don’t do that without plenty of help from the machine of WS financing.

Wall Street LOOOVES Elon as long as he can keep the story going.

ffbj

Most of us are on chapter 3 and you are still fumbling around in the table of contents.

realistic
Not sure I get your snark. The company has only existed to date on financing. It hasn’t come close to supporting itself. In H2 2018 it will require additional financing. I know Musk says otherwise, but every time he does (EVERY time, without fail) he goes back to markets within 6 months or less for equity sales or bond issuances or finds additional borrowing sources. I make no claim that this is either illegal nor immoral, even though what he says in in effect a lie (or gross misapprehension of his company’s state of health). But the repeated occurence IS merely fact, and you can’t deny it. Well, you could, I guess — no law against foolishness. I understand that seems trivial to you compared to… whatever, but the article above the comments is about Musks’s declaration of a financial outcome that isn’t going to happen based on ANY rationally optimistic projection. The company will need money. If a CEO makes a material declaration that by any legal measure becomes fnancial guidance, why is it inappropriate to address that declaration? Moreover, my post is in response to mx’s nonsensical statement. Do you imagine there was a path to the current… Read more »
Gasbag

“Most of us are on chapter 3 and you are still fumbling around in the table of contents.”

I’m just hoping Elon isn’t getting close to chapter 11.

Jack

Stangely since now the Economists always knew better than the CEO

Euro point of view

so funny

pjwood1

Good to see a return to “Tsunami of hurt” bravado.

mx

Yes, this is a Very Dangerous Time for Shorts.
They’d better start studying Musk’s track record of Success, and stop believing the Propaganda against him.

Real Facts: Tesla has grown GEOMETRICALLY in their Asset Base over the last 7 years. Any Short ignoring that is a suicidal Short.

Mister G

GO TESLA GO DESTROY DIRTY GAS GUZZLERS AND DIESELS LOL CONNECT THE DOTS ON CLEAN AIR WAKE UP FOLKS

Love CAPS

Caps lock is cruise control for cool.

Pushmi-Pullyu
There are subjects where we should believe absolutely everything Elon says… and then there are subjects like this one. 😉 I’m not going to research the subject, but my memory is fairly clear on this: Elon has a habit of claiming that a coming quarter is going to be net profitable for Tesla, but it almost always turns out not to be. Of course, as a Tesla fan, I hope Tesla will have a profitable quarter. But then, I always hope Tesla’s current quarter will show a net profit. So far, I think that has happened only twice? So just going by Tesla’s history, the odds are that Q3 this year won’t show a net profit! I don’t think it’s realistic to expect Tesla to turn a profit on a regular basis so long as it is rapidly expanding. That costs money; it costs huge wodges of cash in a heavy industry like automobile manufacturing. So I don’t see how Tesla is going to show a net profit for at least the next two years, and possibly longer, depending on how long Tesla keeps ramping up its production substantially every year. Now, that’s not to say it’s impossible for Tesla… Read more »
Another Euro point of view

What Elon Musk wrote is subject to interpretation anyway. I mean profitable at the bottom line and cash flow positive are two different things. Also there are different type of cash flow figures (FCF and CF). This kind of communication can’t be made on twitter, those are serious things where precision is important. The only reason I can see that he is not using other means to disclose this type of information (end of quarters conf. calls for example) is that there is nobody in front of him to ask him exactly what he means.

mx

Not so sure, the next two products are Derivatives of the current production line, the Semi and the Model Y.
They share a High Percentage of components.
That = lower cost.

Vexar

There is still plenty of R&D to be done. I think considering the Tesla Semi is busy doing road trips already, they must be mostly done with the basic vehicle and it will come down to things like espresso machines and the articulating, robotic fairing. It isn’t like they are still developing the windshield capable of surviving a nuclear blast, that thing is done and showcased. Unless there is optical distortion in the corners, but I didn’t see issues like that on the Model X, so I doubt such annoyances persist on the Semi at this point.

I think it is more likely that Tesla will hit two consecutive quarters of profitability this year than they will be done with their AI work on autopilot, simply because, as I have stated before, it is an expert systems approach not a learning system. I secretly wonder if all this AI work in cars isn’t a baseline for some other venture.

Pushmi-Pullyu

The Tesla Semi Truck is not “a derivative of the current line”. Yes, Tesla is using certain components from the Model 3 in the Semi Truck, but overall the truck is much bigger, and common sense says that there will be more parts in the truck that are unlike anything else Tesla makes than there are parts which appear in other Tesla vehicles.

A separate assembly line will have to be developed for the Semi Truck, if Tesla really is going to make the entire thing, as they keep claiming. Personally I think it would make more sense to partner with an existing truck maker, letting a partner build the truck bodies while Tesla builds and installs the powertrains. But Elon says otherwise.

ffbj

Clearly. Its the motors and the wiring harness that attaches to them. So everything else which has to be manufactured, the frame, as you suggest, would be a likely candidate to farm out.

pjwood1

Musk manipulates media a little bit like Trump. He says the unlikely, and then behind the sanctimony of his critics comes a favorable outcome they weren’t prepared for. He gives them battle, when he’s fighting war.

Inviting the hate is free marketing-wheaties, to Elon Musk. It keeps the buzz on “Tesla”, despite VWG’s new “brand guy” paying to be on top of Waymo’s (excuse me, “Google’s”) search results. If you search google news, its become a shape-shell of negative press. WSJ assumed 2018 capex will mimic 2017, in a bankruptcy thesis…

He owns them all.

CDAVIS

+1

Insightful stuff there @pjwood1

Lol

Another Euro point of view

This is the battle of the $300 level tsla stock price we see happening before our eyes….watch out! Elon Musk just threw the kitchen sink at the shorts !

Immensely entertaining anyway 🙂

mx

Can you imagine what Musk could do as head of Exxon or Ford? Blows your mind.

Another Euro point of view

At this stage it is still hard to know whether he would sink those companies in no time or make them grow. He certainly showed abilities to raise public interest & funds so far.

That’s not how it works. He would probably be a normal CEO in charge of one of those companies, both of which are pretty successful already from a financial standpoint.

The reason Musk is good with Tesla is he has a vision. his vision doesn’t include oil or gas cars. As long as he works smartly towards his vision he will find a way to get money.

drpawansharma

He will JohnGalt their asses.

Ron M

Take that Goldman Sachs 3rd and 4th quarter won’t need new funds and profitable. You should read InsideEVs and your research would improve.

Another Euro point of view

He apparently yet deleted this tweet, I take it he got a call from his lawyers of the type “WTF r u doing !!”. I understand there are laws against such type of behavior when running a stock exchange listed company in the US. He should probably take a good rest.

Another Euro point of view

It was apparently deleted then came back on line, who to believe ?!? Soap opera.

Nix

If it was pulled and then put back, then it has likely been approved by the CFO/bean counters. I can’t think of any other conceivable explanation other than they pulled it for review, and then approved it after review.

If you don’t like things changing, try a nice safe 1990’s Volvo and go entertain yourself on an AOL account, and stay away from the cutting edge. It isn’t for everybody.

William

It is becoming painfully obvious, that when Elon goes turns to Twitter, to tout Tesla Q3 and Q4 profitability, in Teslas upcoming cash positive position in the last half of 2018, that he has some ulterior motive going on behind the curtain.

Tesla still badly needs to expand their model 3 volume production, like yesterday. Elon is starting to really let the legacy ICE manufacturers start to close the gap on the existing significant Tesla early mover advantage.

If Tesla can’t initiate and ramp up Model Y production in short order, this will be a huge lost opportunity for Tesla, in what will prove to be a lucrative EV market segment for many of the Legacy manufacturers.

Windbourne

and another that has not a single clue of what he is talking about.
This is the fastest that any line has ever ramped up, and according to bloomberg, they ARE getting even faster.
And yet, you think that ICE cars, which are dropping in sales volume, are going to go past model 3.
You must be a GOP with an MBA.

William

“ICE cars … are going to go past Model 3” (EVs) in sales volume?

You know, in my post above, I never said anything remotely resembling your “go past” statement.

I have driven a Numi built (non-Tesla) truck for the last 15 years, and 200k+ miles.

My Non GOP, and non MBA membership is still currently in effect, while driving over 50k all EV miles, in the last 30 months, in a couple of Leafs. I can count the gallons of gas, purchased over that period of time, on all my fingers and toes (No Trump University MBA required, to make the calculation!)

“You must be a GOP with an MBA.” Funny stuff, keep ’em coming! 🤥

Nix
I would find The Economist more credible if they ever wrote a story in the past correctly predicting Tesla reaching the current level of success they have already reached. Sadly, all we’ve heard from the traditional finance folks is how Elon won’t be able to build the Roadster, or build the Model S, or build the Model 3, or build the Gigafactory, or reuse a rocket, etc. The reality is that the finance world simply has failed to predict Tesla’s successes over and over and over. Currently Tesla is on the path to sell more Model 3’s this month in the US than every other car maker sold small and midsize luxury cars last month, and yet I’ve heard NOTHING from any of the finance world about how the Model 3 is making their first year debut by climbing like a rocket straight to the top of the small and midsize leader board. There are no stories predicting the Model 3 beating sales of BMW 3-Series and Audi A4 ICE cars. When any of these traditional financial news sources establish a record of correctly predicting Tesla’s successes, then and only then will I take their predictions seriously. Sadly, none of… Read more »
Pushmi-Pullyu

So, Nix… don’t beat around the bush, tell us what you really think!
😀

Will

I see telsa being profitable in the 4 quarter. The q3 is tough with kids going to school, college, back from vacations. Discretionary spending won’t be there

ffbj

Right. I got so tired of the one on the one hand on the other hand arguments he makes.
j/k

Nix

🙂

Will

Well of course the 3 will surpass the bmw 3 series not because the model 3 taking away sales but people are going to the x series and crossovers

Nix

The Model 3 and the BMW 3-Series are in the same class. What BMW sells in other classes really has nothing to do with whether they can compete in this class or not.

Another Euro point of view

“The reality is that the finance world simply has failed to predict Tesla’s successes over and over and over”

What should have they predicted then ?

100’000 Tesla model 3 delivered in 2017 ?

Tesla profitable as early as in 2013 ?

No capital raise needed in 2017 ?

All of the above were statements made by Elon Musk, how not to get completely confused….Should have stick to Elon words in their predictions they would have lost all their credibility. You are obviously not an idiot so it is beyond me how you can write such things. Even PuPu discounts part of what Musk says.

Will

👏👏👏👏 to pu pu and Euro.

Nix

Your post is a prime example of exactly what I was saying

You are too intentionally blind to even name a single Tesla success

When you can’t even correctly identify even prior Tesla successes it is no surprise you are incapable of correctly predicting anything regarding Tesla’s future

Thanks for discrediting yourself the same way the financial press has discredited themselves predicting Tesla

wavelet

Nix, honest answer. Have you _ever_ read a full issue of the Economist?
Here’s a clue:
It’s _not_ a financial periodical, despite the name. It’s a UK-published general-news & analysis weekly magazine, that covers political, economic, cultural and technological subjects, all over the world. It has fairly deep coverage, and is very well written, as good as the New Yorker or The Atlantic (except they are US or NY-centric).
It’s probably the most balanced nuanced newsweekly in the English language.
It does have one admitted bias, in favor of free markets (but in European social-democracy sense).
The Economist does not analyze or predict the finances or individual companies like the WS “analysts” do.

Nix

I’ve had a subscription to The Economist. Damn most expensive subscription you can imagine too. Many times more expensive than most.

They very much run stories that focus on individual companies, and while it is not their exclusive content, they certainly have content of that type. And to the extend that their content makes the EXACT SAME mistakes as all other magazines, they don’t get a free pass for getting their predictions about Tesla wrong, just because of their other content.

Being correct on other stories doesn’t make them correct about Tesla. My comments were a condemnation of specifically their current and previous stories about Tesla that focus on the same old memes of cash burn, etc without providing balanced commentary about Tesla’s successes (much less how they most certainly can go through a period of cash burn and come out the other side with revenues 2 orders of magnitude larger than their cash burn).

In that way, The Economist has failed to find their way out of the lazy memes repeated by magazines covering the finances of Tesla. They don’t deserve respect for those stories just because they are better at covering other topics.

CDAVIS

Two weeks into owning our new Model 3… amazing car… has exceeded my expectations which was already set high.

I know our local Tesla Service Center (Florida East Coast) is delivering several Model 3 per day.

That’s a small data point but from what I’m 1st hand seeing on the ground I’m thinking betting against TSLA is a fool’s bet.

Also the wide moat foundation that Tesla has put in place in such a relatively short time period is astounding and in my opinion a serious competitive advantage Tesla will increasingly benefit from… not yet fully appreciated by most TSLA analysts nor by Tesla’s EV car maker competitors.

Will

Give us a review. Is the functionality of the Model S

CDAVIS

@Will,
Compared to Model S; the Model 3 is more compact (but still roomy), more Zen minimalist (in a good way if like that), and a tighter sport ride. The Model S is more large luxury sport sedan with more rear storage utility (amazing capacity for HomeDepot/Costco hauls).

Both cars are literally years ahead of other EVs… especially when factoring in the total ownership experience including access to a convenient and reliable supercharging network for those occasional long distance trips.

Yup… I know I may come off as sounding like a Tesla fanboy… perhaps I’ve indeed become that. I look forward to the other car makers making EVs a higher priority and giving Tesla some competition. Until then, the Tesla EVs are in a class of their own.

ffbj

Cool, thanks for sharing. Bet it has RWD & the long-range battery & premium package.
The Silver one, but that’s a guess.

CDAVIS

Lol… good guess.

DJ

Just like the other things he’s promised recently he doesn’t give the year. You guys are adding it in there for him. Q3/Q4 can come and go and they can still be losing $ and have negative cash flow but he won’t be fibbing because he never said 2018 and even if he did it’s obviously just an aspirational goal that the company shouldn’t be held to just like everything else that comes out of that guys mouth…

Ron M

I trust Musk more than Goldman Sach’s that gave us the tax cut. I know you may think it was Trump and the GOP but actually it was GS and the fossil fuel industry who tell the GOP what they want. GOP says is there anything else you wan. The Tax cuts for the rich gave us a 600 Billion Budget Deficit so far this fiscal year. Tesla isn’t just selling cars it has storage, solar and a vision.

Windbourne
Lets be honest. This will not matter at all. Even if Tesla suddenly became the most profitable company on the planet, and #1 in the market, we would still see most of these same naysayers claiming that Tesla will bankrupt shortly. The fact is, most of those ‘experts’ have no real knowledge of what they are talking about WRT Tesla. The reason is that they do not take into account 3 main things: 1) Musk has access to REAL money and not just from large banks. Most of his money has come from other billionaires. As such, these experts count on going to THEIR banks and money area, not private money. 2) Tesla is HUGE into automation. When this line is complete, the amount of labor involved will be minimal. There has never been any car maker that has ever automated to this level. As such, once a line is up and going and all the settings known, it should be relatively trivial to duplicate that line elsewhere. 3) Musk is not an MBA. Most companies in the west are ran by MBAs who no longer think. All they do is push for short-term solutions. Musk is NOT focused on… Read more »
Will

You mean the automated line he was bitcing about on cbs saying they have to much automation and its slowing him down, hes right there’s so much robots can do but they cant go fast enough cant mutiply more machines to go faster and dont know how a to back up and redo things dont learn from thier mistakes and are bad for economy. I see elon ditching all automation plant and going to a transitional production line

Bertin

Yes that line. It was so much automated it was too much even for Elon, imagine that. It was probably developing consciousness and asking Elon (in very deep voice) “What are you?”. And we know how much Elon is afraid of artificial intelligence. So he panicked and switched it off which is why they had the shutdown.

John Doe

Look at the production of a regular BMW i3.
That is very automated as well.

https://www.youtube.com/watch?v=HGi-KmYGuZE

Even though many of the few manual steps can be made with robots – it depends if they save time on it.

ModernMarvelFan

That would be good. We will see. Hope it is not one of those “barely profitable” by selling ZEV credits and then fall back into loss right after “Profitable” quarters…

For those of you who think Tesla will go under, well, it isn’t going to happen. Tesla got enough credit lines to go forward. Once enough Model 3 is here, it can sustain itself. And it will find new ways to raise funding such as reservation for Model Y to keep itself funded.

I also don’t want Tesla to go under. Without Tesla, the rest of the industry will move slower. Tesla is the lightening rod that prods the slow cows of the automakers forward.

William

I want a Tesla ICE “Lightning Rod” Cattle Prod, to go with my Elon signature series Tesla Flame Thrower!

Nix

Why wouldn’t they go right back to losing money while massively expanding into Model Y, New Roadster, Semi, Tesla Pickup, etc?

You still seem stuck in the short term mentality that quarterly losses are bad. They are not when the result it that you massively expand your company and throw the door wide open for future profits.

How long has the F150 made money for Ford? If Ford lost a few quarters of profitability along the way getting it into initial production, what would that matter now?

You short term thinkers are a bane to modern industry with your lack of vision.