Tesla follows Musk warning with smaller profit than prior quarter
Following Elon Musk's recent warning of a "very difficult" time ahead for Tesla, the electric car maker on Wednesday reported a much smaller profit for the fourth quarter than it saw during the previous three months. Still, the earnings marked a second consecutive quarterly profit, a first for Tesla since going public.
"I'm optimistic about bing profitable in Q-- not by a lot -- and for for all quarters going forwards," Musk told analysts in a post-earnings call.
Tesla now faces the challenge of maintaining profitability in the face of debt repayment obligations.
It'll be an uphill climb. The electric car maker reported a net profit of $139.5 million for the three months ending Dec. 31, compared with a $311.5 million profit in the third quarter, a time when it benefited from government credits for electric car purchases.
The company also projected it would be producing 7,000 Model 3s a week by the end of 2019, up from the current 5,000.
Tesla reported its cash position improved by about $1.5 million during the quarter even as it repaid $230 million in convertible notes. For the full year, the company lost $976.1 million.
"Things really aren't going to get any better for Tesla in the U.S. than they did at the end of 2018," Jessica Caldwell, executive director of industry analysis at Edmunds, wrote in a statement. "Turning a profit, creatively addressing production challenges and getting the Model 3 to the masses were huge milestones, but keeping up this momentum is going to be virtually impossible."
Musk on Jan. 18 announced thousands of layoffs and said Tesla was looking for a "tiny profit" in the first quarter -- "with great difficulty, effort and some luck." The Tesla CEO also projected a fourth-quarter profit, but scaled back from the third quarter number.
Tesla must be "relentless about costs" in order to make affordable cars without going bankrupt, Musk said of the the company's cutbacks. He added that he believe Tesla would remain profitable in a recession, something he considers likely in the next 12 to 18 months.
Musk also announced that CFO Deepak Ahuja would be retiring from Tesla, with Zach Kirkhorn set to replace him.
Since introducing the Model 3 three years ago, Tesla's difficulties have ranged from production snags to cash shortages to Musk's famously eccentric behavior.
Tesla's production of the Model 3 has been rolling along steadily at more than 5,000 a week, but the company must now compete with lower-priced electric cars by rivals including Audi, as well as the reduced electric-car credits from the government.
"While there's still a cool factor to owning a Tesla, it may not be enough to convince buyers to choose one over brand new models from Audi, Porsche and Jaguar," offered Caldwell.
Shares of Tesla were down 1.6 percent in after-hours trade, after ending the regular session Wednesday nearly 5 percent higher.