Tesla Inc. said on Wednesday that it will be sticking with CEO Elon Musk’s revised production targets for the Model 3 sedans. This worked in cheering the investors who have stayed despite the two delays.
The company then added that it’s also planning to raise spending this year, emphasizing its growing need for cash.
Reflecting the mixed fourth-quarter report, Tesla shares were barely changes during extended trading. Nonetheless, the shares of the Palo Alto, California-based company were up 10 percent since the beginning of 2018.
Tesla’s long-term sustainability depends on the company selling billions of dollars of Model 3s. The new sedan has a price tag starting at $35,000, only around half the price of its flagship Model S. The company then stated that net reservations for the new model were tabled during the fourth quarter.
There were only 1,550 deliveries made during the fourth quarter, which was far below the 4.100 vehicles analysts expected. This showed that revenue for the Model 3 has yet to hit Tesla’s bottom line. Production delays were mostly blamed on battery issues.
Musk assured analysts that the obstacles to the production of 5,000 vehicles by the end of second quarter “were getting smaller with every week.” He then said that Tesla could begin generating sustained positive operating income “at some point in 2018” once they reach the production rate.
“I‘m cautiously optimistic that we will actually be GAAP profitable with no asterisk,” Musk added. Tesla lost almost $2 billion last year using that accounting method.
Model Y Crossover Investment in Late 2018
Tesla will start making capital investments for its Model Y crossover planned for the third or fourth quarter of 2018.
The vehicle is meant to be designed in a way that it will remove as many of the headaches that Tesla faced when producing earlier models. Musk stated that he no longer wants a repeat of his stay at the Gigafactory during Thanksgiving.
Musk also stated that he might discuss more details about the Model Y on another earnings call later in 2018.
The Model Y will be Tesla’s first crossover vehicle, which is the fastest growing segment of all the other U.S. passenger vehicle market. Tesla currently produces one sport utility vehicle, the Model X, and two sedans.
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