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Tesla Earnings: Model 3 Production Is Ramping Up

09 February 2018

A day after SpaceX successfully launched the most powerful rocket in the world, Tesla posted a $675.4 million net loss for the fourth quarter of 2017, compared with a net loss of $121.3 million a year ago.

Going into Tesla's (NASDAQ: TSLA) fourth quarter, one of the key items to watch was whether the electric-car company would still be on track with its most recently updated Model 3 production targets.

While the losses may make Tesla look like it is in trouble, the company still entered the first quarter of 2018 with a cash balance of nearly US$3.4 billion. Analysts polled by Bloomberg - only a third of whom have a buy rating for the stock - give Tesla an average target price of $319, or 5% below where shares were trading Thursday morning.

But it was also a year of manufacturing setbacks that Musk said, last quarter, had put the Model 3 "deep in production hell". He noted that on Model 3 production, the company's semi-automatic lines are working faster than the fully-automated lines, but the company's engineering firm in Germany has developed a fully-automated line that will be delivered to Tesla's facilities at the end of March. People want Tesla products, but Tesla can't stop spending more money than it has. Clement Thibault, a senior analyst with the web site Investing.com, grumbled about Musk's recent fundraising efforts for The Boring Co., his new tunnel-drilling company. For example, he said, the company has almost completed an automated battery module assembly line which will speed production at its Nevada battery factory. In addition to the Semi going into production in 2019 and the Roadster coming in 2020, Tesla plans to add a crossover called the Model Y. But he didn't say whether the company will meet its stated goal of making 10,000 Model 3s per week at some point this year. The crossover sales are growing faster than sedans in the United States, which represents a huge opportunity for Tesla's Model Y. The California company now makes two sedans - Model S and Model 3 - and an SUV called Model X. Given that Tesla's first quarter ends in less than two months, management must have a high level of confidence in this target. The quarter after the Model 3 was introduced, Tesla revealed that it had only delivered some 266 vehicles.

CEO PAY: This will be Musk's first earnings call since last month's announcement of a proposed all-or-nothing pay package for him. Still, Musk said he is "cautiously optimistic" that Tesla will be profitable this year. "We have to solve passive optical extremely well", Musk said, referencing running image recognition based on camera data.

New cars come equipped with safety systems. His latest promotional stunt involved firing off a sports auto into the sky atop the world's most powerful rocket.

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