Tesla said it would build up to 55,000 Model 3s in the current quarter at a positive gross margin, buoying hopes that the electric vehicle maker led by Elon Musk will meet its goal of profitability and positive cash flow in 2018, as it strives to recover from manufacturing challenges.
"In July 2018, Model 3 not only had the #1 market-share position in its segment in the US, it outsold all other mid-sized premium sedans combined, accounting for 52% of the segment overall", Tesla said in a statement reporting earnings. Tesla reported a record net loss of $718 million, which was larger than what analysts had been forecasting.
While Tesla so far has been mostly losing money at a growing pace, Musk reiterated on Wednesday he expects the company to become profitable as soon as the next quarter after it boosts production of its Model 3 vehicle, envisioned for mass marketing. Tesla estimates that it will produce between 50,000 and 55,000 Model 3s in the third quarter, almost double what it built this past quarter. There's "no excuse for bad manners", Musk said.
Beyond operating costs, Tesla has paired down an initial $3.4 billion capital expenditure estimate for the year to a slimmer $2.7 billion.
But analysts have said in recent weeks they thought demand for the Model 3 might be waning because of long wait times.
On the call, Musk also said he expects the company to avoid returning to the markets for capital and to be "essentially self-funding on a go-forward basis".
Last quarter, Musk dismissed analysts who asked questions about Model 3 reservations and other financial matters during the quarterly conference call.
Musk has gone to great lengths to fulfill that promise, announcing cuts to some 9 percent of the company's staff or about 4,100 people.
Once the report came out and Tesla's stock began to rise, Musk returned to Twitter, not to discuss financials but to encourage video-game developers to apply to the company. The stock has slumped 19 per cent since a 2018 high of $370.73 in June.
Tesla pulled out all the stops to finally achieve this at the end of June, flying in a production line from Germany on a cargo plane, adopting an around-the-clock schedule and erecting a massive tent to house another assembly line in the parking lot of its California plant. Automotive gross margin increased to 20.6% GAAP up from 19.7% in the previous quarter which means Tesla makes more money from every auto it sells than it did before.