Tesla started 2018 with a record quarter in a number of ways, the company announced today. It generated $3.4 billion in revenue, which is more than ever before. Tesla also burned through more money than ever, turning that revenue figure into a nearly $785 million loss. Tesla set a new company high for cars made in the first quarter of a year, too, including the critically important Model 3, which the company is making at a pace of about 2,200 per week — still below the oft-delayed 2,500 per week target set by CEO Elon Musk.
Today, Musk and Tesla chief financial officer Deepak Ahuja claim in a quarterly letter to (and a subsequent call with) investors that the company will get back in the green in the second half of this year. And Musk reiterated his claim that Tesla will do this without taking on additional investment in 2018. Part of how he plans to get there was revealed on the investor call, when he said Tesla will perform some sort of restructuring regarding the contractors the company uses. “The number of third party contracting companies we’re using is out of control,” Musk said. “We’re going to scrub the barnacles on that front. We’ve got barnacles on barnacles. So there’s going to be a lot of barnacle removal.”
In the meantime, the company is down to $2.7 billion in cash, after starting the year with $3.4 billion. Such are the highs and lows that come with the company that’s trying to make a stylish-yet-practical electric car for the masses while doing many, many other things at the same time.
Tesla says that, despite the uphill climb through “production hell” with the Model 3, the total number of reservations for the car remains above 450,000. This could mean two things. Either there aren’t that many people canceling their preorders after the now “six to nine month” delay for deliveries. Or Tesla is attracting enough new preorders to keep the number hovering near the half million mark.
Whatever the answer is, Tesla says it remains primarily focused on increasing the number of Model 3s the company can make per week as it heads into the second quarter of the year. It needs to, because, right now, the company is still losing money on every one it ships. While it’s targeting a gross margin of 25 percent on the Model 3 sometime next year, Tesla won’t break even on each car sold until at least the middle of this year when it reaches the 5,000–6,000 per week production mark, the company said in the quarterly letter.
A recently leaked email from Musk to his employees described some of the lengths Musk is willing to push the company to reach that point. In the coming weeks, Tesla will add another shift and push production around the clock in order to make 6,000 Model 3s per week by the midway point of 2018. This gives them, according to Musk, enough “margin of error” to make at least 5,000 deliverable cars per week. “Actual production will move as fast as the least lucky and least well-executed part of the entire Tesla production/supply chain system,” he wrote in the email.
Even still, Musk and Ahuja said in today’s letter that more shutdowns of production will be required to reach that target. These days-long delays let the company address “small, known constraints” that increase the output in the long-run, they say.
Tesla has long touted plans to use robots to build the Model 3 (and its other cars) at increasingly high volumes, but Musk recently walked back some of those statements in an interview with CBS This Morning where he said the company might have been too reliant on automation. That said, in today’s investor letter, Musk and Ahuja were back to talking up automation. “In the end, this is all about having factories that are producing the world’s highest quality cars as quickly and as cost-effectively as possible, and with as close to zero injuries as we can possibly get,” they wrote. “Our automation strategy is key to this and we are as committed to it as ever.”
This ongoing conversation about automation comes at a time when Tesla is facing scrutiny about the safety of its factories. Recent investigative reports have detailed a number of worker injuries sustained at Tesla’s assembly plant in California, and the state’s Occupational Safety and Health Administration has opened inquiries into the company.
As Tesla works 24/7 to ramp up production of the Model 3, the company is also starting to see money come in from some of its other efforts — namely, its solar and energy storage business. Tesla nearly doubled the amount of revenue that came from energy storage last year, and saw an increase of 38 percent from last quarter alone. At $410 million, it’s still a far cry from the nearly $3 billion the company generates per quarter on its car business. But it’s become a bit of a buffer for Tesla, even before the company has shipped any significant number of its new solar roofs.