Tesla turbocharges delivery, but investors want profits – The Wall Street Journal

Tesla probably produces the sexiest electric cars on earth. The sporty versions are sleek and fast and its branding appeals to the wealthier set. After disappointing analysts in the first quarter, South Africa-born tech entrepreneur Elon Musk pulled a rabbit out of the hat this week when his company revealed that it had delivered vastly more vehicles than this time last year. But, Musk has let down investors so many times that these manufacturing figures have failed to impress. Analysts want to see profits. And they are tiring of Musk's antics on Twitter and his management style. Earlier, it emerged that many of Musk's key employees are leaving for pastures greener. As thestreet.com reports, Jan Oehmicke, the former CEO of BMW's financing unit in France who was hired last May, has quit. That departure follows that of Peter Hochholdinger, Tesla's former head of vehicle production at its Freemont, California facility, who was named Lucid Motors VP of manufacturing. As many as 60 executives have left the company this year, according to Yale University's Jeffrey Sonnenfeld. – Jackie Cameron___STEADY_PAYWALL___.Tesla deliveries reach record quarter after questions about demand.By Tim Higgins(The Wall Street Journal) – Tesla Inc. returned to growth mode in the second quarter, setting a record for deliveries and beating Wall Street's expectations, relieving some pressure on Chief Executive Elon Musk to prove that demand remains strong for the electric-car maker's vehicles.The Silicon Valley auto maker delivered a total of 95,200 vehicles in the three months that ended June 30, a sharp increase from a year ago as the company worked to boost production. Analysts surveyed by FactSet on average expected total deliveries of 90,680. The previous record was 90,700 in 2018's fourth quarter.Tesla also said on Tuesday that the total includes deliveries of 77,550 Model 3 compact cars, beating the 74,100 expected by analysts. The company didn't mention its full-year target of delivering between 360,000 and 400,000 vehicles globally."We made significant progress streamlining our global logistics and delivery operations at higher volumes," the company said.Tesla shares, down 33% over the past year, rose 6% in after-hours trading Tuesday.Lower-than-expected sales in the first quarter put pressure on Mr. Musk to deliver improved results. Investors and analysts have expressed concern that demand for the Silicon Valley auto maker's cars had peaked almost two years after production began of the Model 3. The company has bet the compact car, with a starting price of about $35,000, can help push it from making tens of thousands of cars a year to millions.Mr. Musk set expectations high for 2019 when, amid two consecutive profitable quarters, he promised last year that profit and positive cash flow lay ahead – now that Tesla had finally learned to build the Model 3 following months of delays and other dramas.The company delivered almost 250,000 vehicles last year. That was about half as many as promised in 2016, but still remarkable growth for a 16-year-old company better known for a large, sporty sedan that sold on average for $100,000.Investor enthusiasm for Mr. Musk's vision for Tesla and its growth story had helped push the company's market value to rival General Motors Co. , despite never turning an annual profit and delivering a fraction of the vehicles globally.The first-quarter results punctured Tesla's growth story as deliveries fell 31% to about 63,000 from the fourth quarter. Tesla blamed the decline on the challenges of exporting the Model 3 to Europe and China for the first time. The company also blamed pull-ahead of sales into the fourth quarter from customers eager to get the $7,500 US tax credit before it sank to $3,750 in the first quarter. It dropped again on Monday to $1,875 and will be phased out entirely at year's end."Tesla has become the ultimate 'prove me' stock and it all must start with a good 2Q delivery unit number to restore Street-cred back in the story as Musk & Co. have talked the talk," Daniel Ives, an analyst for Wedbush Securities, said in a note to investors ahead of the results."Tesla's ability to hit its overall unit guidance for 2019 of 360k to 400k units," Mr. Ives added, "will be the telling tale of demand trends as Tesla is now a `demand story' rather than a production story."While sales may have improved, analysts expect a quarterly loss. Tesla has worked to adjust pricing of its vehicles during the first half of the year, lowering the Model 3 to about $35,000. The long-promised price point was supposed to make the car more accessible, but analysts speculated that would be hard to sustain, in part because of the cost of batteries. The second quarter was the first full period for Tesla to benefit from a cheaper Model 3. Analysts surveyed by FactSet estimated the average selling price of the compact car fell to $50,000 from $57,000 in 2018.In total, Tesla built 87,048 vehicles during the second quarter compared with about 77,100 vehicles in the first quarter. That figure includes 72,531 Model 3s compared with 62,950 for the previous three months. The company had more than 7,400 vehicles in transit at the end of the second quarter that will be counted as delivered in the third quarter. The company announced it would stop providing in transit numbers in future quarters.Tesla said it entered the third quarter with a backlog of orders. "We believe we are well positioned to continue growing total production and deliveries in Q3," the company said.The company delivered a total of 40,740 vehicles in the second quarter of 2018, including 18,440 Model 3s. Deliveries of Tesla's older and more expensive vehicles, the Model S large sedan and Model X sport-utility vehicle, fell 21% to a combined 17,650 in the past quarter from 22,300 a year ago.The "push for deliveries'' isn't likely to help margins but mitigates cash burn, Brian Johnson, an analyst for Barclays, said in a note last week. "While we continue to believe that the Model 3 and S/X are headed towards a low-profit purgatory, at the same time, due in large part to regulatory credit sales, we believe that Tesla has an incentive (much as the Detroit 3 in the early 2000s) to 'move the metal'; in other words, prioritise deliveries over margins and pricing, which it appears to have done this quarter."Despite the improved sales, Jeffrey Osborne, an analyst for Cowen, said he doubts Tesla will be cash-flow positive in the quarter. He called Tesla's guidance of as many 400,000 vehicles this year aggressive and expects a better picture of true demand to emerge during the third quarter, based on the assumption that pent-up demand in Europe and China will be exhausted."Tesla has been stuck in some form of 'hell' (production, delivery, battery, logistics, etc.) for a while and no sense of normalcy appears in sight," he wrote in a note to investors.

Tesla turbocharges delivery, but investors want profits – The Wall Street Journal

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