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Elon Musk Says Pedophile Accusation Against British Man Was Protected Speech
Tesla CEO files motion to dismiss defamation lawsuit, arguing his insults on Twitter couldn’t be interpreted as facts
Dec. 27, 2018 2:16 p.m. ET
Elon Musk sought to dismiss a defamation lawsuit, with his lawyers arguing that no one could have taken seriously his claim that a British cave diver is a pedophile, especially because the statement was made in the “rough and tumble” forum of Twitter.
The motion, filed late Wednesday in U.S. District Court in California, is the latest twist in a war of words between Mr. Musk, the chief executive of Tesla Inc. and Space Exploration Technologies Corp., and British cave explorer Vern Unsworth. Mr Musk took offense after Mr. Unsworth, in a CNN interview in July, dismissed the billionaire entrepreneur’s efforts to rescue a youth soccer team trapped in a Thailand cave as an ill-informed public-relations stunt.
In response, Mr. Musk suggested in a tweet that Mr. Unsworth was a pedophile, prompting Mr. Unsworth to sue Mr. Musk for defamation in September.
Central to Mr. Musk’s defense is that he made the pedophile accusation on “the rough-and-tumble Twitter platform,” which the motion describes as a website “infamous for invective and hyperbole.” Given that, and that Mr. Musk didn’t actually know Mr. Unsworth, reasonable readers construed his “over the top insults” as opinions, and therefore protected free speech, rather than statements of fact that could be considered libelous, the CEO’s lawyers argue.
Mr. Unsworth’s lawyer, Lin Wood, rejected the claims made by Mr. Musk that statements made on Twitter are protected free speech. “I am confident the trial court will likewise reject this fanciful position which if adopted, would effectively prevent an individual from seeking redress for any and all false and defamatory attacks on reputation published on the Internet,” he said in a statement Thursday.
George Freeman, executive director of the Media Law Resource Center, a nonprofit association of publishers that assists in defending free speech rights, said it is true that people look more skeptically at statements made on the internet, but added that doesn’t mean that nothing said on the internet is defamatory.
“We don’t want to be in a regime where just because it’s on the internet you can say anything you want,” Mr. Freeman said. “There’s no law to support that.”
Mr. Musk’s lawyers also argued in their brief that because Mr. Unsworth hurled the first insult, Mr. Musk’s response is more properly interpreted as an opinion, and was therefore protected speech.
“Who started it might work in the playgrounds, but not in court,” says Mr. Freeman. “It’s not a fact you look at. It’s either libelous or it isn’t.”
We are excited to announce that Larry Ellison and Kathleen Wilson-Thompson have joined Tesla’s Board of Directors. Each joined the board as an independent director, effective December 27th, 2018.
The board, led by its Nominating and Corporate Governance Committee, conducted a thorough, expansive process in searching for its new independent directors, considering candidates with a wide range of skill sets from across the globe who also hold a strong personal belief in Tesla’s mission of accelerating the world’s transition to sustainable energy.
“In conducting a widespread search over the last few months, we sought to add independent directors with skills that would complement the current board’s experience. In Larry and Kathleen, we have added a preeminent entrepreneur and a human resources leader, both of whom have a passion for sustainable energy,” said Tesla’s Board of Directors.
As Executive Chairman, Chief Technology Officer and founder of Oracle, Larry’s background as an entrepreneur and philanthropist needs no introduction. Larry is also a big believer in Tesla’s mission, having purchased 3 million shares earlier this year.
Kathleen brings decades of leadership experience in global human resources management. After spending 17 years at Kellogg, and now serving as Executive Vice President and Global Chief Human Resources Officer of Walgreens Boots Alliance, the nation’s largest pharmacy and health and wellness company with more than 350,000 employees, Kathleen brings a passion for building and promoting great workplaces. Kathleen also has nearly 10 years of board experience, serving on public boards at two U.S.-based manufacturing companies.
Tesla had over 3,000 Model 3 vehicles left in inventory in the United States as of Sunday, automotive news website Electrek reported on Monday, citing people familiar with the matter.
Weren't these things pre-ordered out for years? Why 3,000 sitting in inventory?
Tesla Inc. said it would reduce prices for its vehicles in the U.S. after it reported global deliveries during the final three months of the year more than tripled from the same period a year ago.
Tesla said Wednesday it would reduce prices for the Model S, Model X and Model 3 vehicles in the U.S. by $2,000. The company said the move, in part, was to help make up for a reduction in the federal tax credit available for electric-vehicle purchases.
Fueled by the increased production and sales of the new Model 3 sedan, the Palo Alto, Calif.-electric car maker delivered a total of 90,700 vehicles in the fourth quarter, up from 29,870 a year earlier.
The company’s full-year total deliveries reached 245,240. In 2017, the auto maker sold 102,807 vehicles after struggling to increase production of the Model 3.
However, shares of Tesla fell 7% in premarket trading after the company missed analysts’ expectations on Model 3 deliveries and internal targets on full-year deliveries of Model S sedans and Model X sport-utility vehicles.
Chief Executive Elon Musk had promised to increase sales and production of the Model 3 in the fourth quarter from the third quarter. He spent the final weeks of the quarter urging buyers to take advantage of the $7,500 federal tax credit that phases out for the company this year.
Deliveries of the Model 3 in the fourth quarter rose to 63,150 from 1,550 in the period last year. Analysts surveyed by FactSet had expected Model 3 deliveries to rise to 64,900.
The car, which starts at $46,000, is Mr. Musk’s bet that Tesla can make a more affordable vehicle as part of his vision for broader adoption of electric vehicles in the auto industry. Producing the Model 3, however, proved harder than he expected and Tesla missed several self-imposed deadlines to ramp up production to the rate of 5,000 a week.
Tesla finally reached the 5,000-a-week goal during the final seven days of June, then spent the third quarter trying to keep Model 3 production at a steady pace.
During the fourth quarter, Tesla built a total of 61,394 Model 3 sedans, or on average 4,723 a week during the period’s 13 weeks.
After learning to build the Model 3, the company has struggled to put customers behind the wheels of those vehicles because of logistics issues. Deliveries rose to 63,150 during the period compared with the third quarter when Tesla delivered 55,840 Model 3s.
The company said it had 1,010 Model 3s in transit to customers. Tesla had previously said it had 8,048 Model 3s in transit to customers at the end of the third quarter that would count as deliveries in the fourth quarter.
The company also slightly missed its goal of delivering a combined total of 100,000 Model S and Model X vehicles during the year. Tesla delivered 13,500 Model Ss and 14,050 Model Xs in the fourth quarter, raising the total for the year to 99,394 compared with about 100,000 in 2017.
Their delivery logistics suck. Here's a video on a guy -who made a YT channel about buying salvaged Tesla's and rebuilding them- buying a used Model X.
^This is the model that Europe has been waiting for. The Model S is too big for European streets.
My sister who now works at a travel agency got to rent a Model S in Switzerland and drive it for a few days, she absolutely loved the car, called me and told me all about it; but one night in Lucerne she curb rashed the tire badly because the car was too big to get through a narrow city street that her GPS had led her down. If this sounds strangely similar to The Grand Tour Season 2 Episode 1 where Hammond drives the electric car in Switzerland (almost dies) and visits the Swiss Museum of Transport in Lucerne, it is. She went to the same museum too.
One year ago, Tesla Inc. was struggling to turn out a few hundred Model 3 sedans in a week—and then things got worse. Elaborate plans for factory automation had to be scrapped at extraordinary cost, debts piled up and investors were spooked. At the lowest moments of 2018, Chief Executive Office Elon Musk said, the company bled $100 million a week.
To start 2019, Tesla is turning out more than 4,700 Model 3s each week. The electric-car maker has emerged from its year of existential uncertainty as one of the most valuable car companies in the world, with a stock value greater than Ford Motor Co., General Motors Co., BMW AG and, depending on the day of the week, Daimler AG. This may end up helping the company reduce its debt obligations and limit future borrowing costs. The hot mess that was last year has, somewhat surprisingly, forged Tesla into a company on more solid footing for the year ahead.
As more cars roll out, money is flowing in. The Model 3 is now generating more revenue than any other sedan in the U.S., and Tesla’s cash flows have flipped from burning about $1.7 billion in the first half of 2018 to generating $774 million in the third quarter. (Results for the fourth quarter and full year are expected in February.)
A decade after cobbling together its first car, Tesla and its havoc-making CEO still have much to prove. But the question of whether Tesla would ever make the leap to mass manufacturing has been answered. Here are seven themes capturing Tesla’s tumultuous year of “production hell” and indicating where the company could go next.
Finally Cashing In on Mass Production
In the final weeks of 2018, Tesla sold its 500,000th car. That milestone took 10 years to achieve. The next half-million car deliveries will take about 15 months, if the company maintains its current pace, which would make Tesla both the first automaker in the world to sell 1 million electric vehicles and the first major American carmaker to emerge in nearly a century.
Tesla sold almost as many cars in 2018 as all the years that came before it, combined. This growth fueled Tesla’s climbing shares, which rose more than 50 percent from an October low—after Musk lashed out at the Securities Exchange Commission over his punishment for problematic posts about taking the company private—to a December high. In the closing weeks of 2018, Tesla’s market capitalization overtook Mercedes-Benz maker Daimler as the third most-valuable automaker. Since then, the two have vied back and forth for the spot.
It’s worth remembering just how unlikely this happy ending for the year seemed back in the spring. Tesla had spent billions in preparation for the Model 3, building the world’s biggest battery factory in Nevada, expanding production facilities in California, hiring thousands of new employees and assembling an army of robots with the intention of building the automated factory of the future. When those plans went awry, the spending continued—but without the revenue that Tesla was counting on from selling Model 3s.
In March, Moody’s downgraded Tesla’s unsecured debt to seven steps into junk. At one point, Musk told Axios on HBO, his company was “within single-digit weeks” of running out of money.
The turning point came in in the third quarter after Model 3 production suddenly doubled to more than 4,000 cars a week, and the money started to flow into the company, not just out. The chart below shows Tesla’s free cash flow since 2012. With each progressive car launch, Tesla dug deeper into its pockets than ever ever before. Musk told Bloomberg Businessweek in July that it was Tesla’s “last bet-the-company situation.” A few months later, Musk said Tesla had moved into the black for good.
“As Tesla delivers steady cash flow, a new group of investors will begin taking positions, helping drive shares higher,” said Oppenheimer analyst Colin Rusch.
All analysts surveyed by Bloomberg now predict that Tesla will turn a profit in the fourth quarter, with an average estimate of $206 million on a GAAP basis. That’s a major reversal from April, when analysts’ consensus was for a fourth-quarter loss of about $234 million. The change in expectations for Tesla’s 2019 free cash flow are even more stark, flipping to about $837 million from negative $795 million as of early May.
Selling cars in larger numbers turns out to do wonders for the bank account. By the end of September, Tesla increased its cash on hand by a third to $2.98 billion. That’s enough, Musk says, for Tesla to continue funding growth while covering debt obligations—all without selling more stock or new bonds. Those obligations include $920 million in convertible debt due in March, which Tesla intends to settle with a 50-50 split between cash and stock if it’s able to keep its stock above roughly $360.
Tesla’s improving outlook doesn’t necessarily make its high-flying stock a good investment. Just 13 out of 37 analysts surveyed by Bloomberg recommend buying shares. Morgan Stanley analyst Adam Jonas told Bloomberg in December that Tesla should raise at least $2.5 billion to give it another year to 18 months of “extra oxygen in the tank.”
Staying on Top Without Tax Incentives
Tesla now dominates the global market for electric cars. In the first nine months of 2018, it sold 19 percent of the world's EVs, as shown in the chart below. Three of the next four manufacturers are from China, the world’s biggest EV market, where Tesla intends to build the first major auto factory owned entirely by a foreign company on Chinese soil. Musk made a surprise trip to Shanghai for a ground breaking ceremony on Monday and said on Twitter that production of the Model 3 will begin at the new plant in late 2019.
The question now is whether Tesla can hold its position in 2019. Morgan Stanley's Jonas warned that U.S. demand for the Model 3 will decline in early 2019, as the U.S. federal tax credit begins to taper down for Tesla. A pending Model 3 roll-out in Europe, Jonas said, might not make up the difference.
Tesla started the new year by dropping prices for all of its cars by $2,000 to partly offset that expiring tax credit. Tesla’s stock plunged 9.7 percent the following two trading sessions as investors questioned whether the company will be able to sustain both strong demand and profit margins at the same time.
Tesla will also face real competition in 2019, with the roll-outs of the Porsche Taycan, Audi E-Tron, Jaguar I-Pace, Mercedes-Benz EQC and the BMW Mini. It’s still nowhere close to accumulating the revenue, earnings, and capital resources its biggest competitors have.
Tesla’s Little-Noticed Edge: Battery Costs
A key to Tesla’s success thus far has been its heavy investment in batteries. Lithium-ion battery production follows a well-documented learning curve: Whenever global production capacity doubles, prices decline by about 18 percent, according to data from Bloomberg New Energy Finance. By moving into mass battery production early, Tesla has consistently beat the industry average for price.
In a rare disclosure of Tesla’s battery prices, Musk said in June that his company’s costs for battery cells—the small cylindrical components of its battery packs—had dropped to $110 per kilowatt hour (kWh) and would reach $100 per kWh by the end of 2018. That compares with an average price of about $127 per kWh industrywide, according to data compiled by BNEF.
Another way to measure battery pricing is on the pack level, which includes cooling tubes, wiring, packaging and other components. Tesla is on track for pack prices of $100 per kWh in 2020, according to Musk. If accurate, that could put Tesla about three years ahead of the its competitors.
To maintain its market share and stock value, Tesla must continue to come up with winning products like the Model 3 and execute them more smoothly than the company has with previous launches.
Tesla arguably has the most highly anticipated product roadmap in the industry for the next few years. But even when Musk is ahead, he’s always running late: A Bloomberg analysis last year found that Musk typically blows his own deadlines by about 50 percent of the original projection.
Tesla’s New Product Roadmap
Beyond the Model 3, 2018 was full of drama for Tesla. Musk tweeted that he might take Tesla private at $420 a share, then quickly backtracked. He was subsequently charged with fraud, settled with the SEC and had to give up his role as board chairman. Tesla disclosed additional probes by the SEC and Justice Department, and investors and whistleblowers filed lawsuits. Key executives left the company amid widespread coverage of Musk’s mercurial management tendencies.
In the latter half of the year, there were some signs of normalcy. Tesla stopped selling the $3,000 “Full Self Driving” feature that doesn’t yet exist. Musk effectively named a No. 2, promoting Jerome Guillen to president of automotive operations. Tesla appointed an independent board chair in Robyn Denholm, and a hard-hitting general counsel, Dane Butswinkas, to replace Musk’s personal divorce lawyer in the role. Oracle Corp.'s Larry Ellison and Walgreens Boots Alliance Inc.’s Kathleen Wilson-Thompson joined the board as independent directors.
“We believe the narrative will continue to change from ‘Tesla will never make money’ to ‘Tesla can be sustainably profitable,’” said Baird analyst Ben Kallo.
Tesla’s troubles aren’t over. The flood of new cars are putting a strain on its sales, service, and Supercharger infrastructure. The company is building new plants, launching products and running its budget thin enough that a big blow to the economy or another bungled vehicle roll-out could be calamitous. But Tesla starts 2019 in considerably better condition than it was in a year ago.
“It’s been super-hard. Like there is for sure some permanent mental scar tissue here. But I do feel good about the months to come.”—Elon Musk
Elon Musk says cuts are part of an effort aimed at selling the Model 3 sedan at a lower price
Jan. 18, 2019 5:05 a.m. ET
Tesla Inc. is cutting its full-time workforce by 7% as part of an effort to lower costs so the company can sell the Model 3 sedan at a lower price, the auto maker’s top executive told employees Friday.
“Tesla will need to make these cuts while increasing the Model 3 production rate and making many manufacturing engineering improvements in the coming months,” Chief Executive Elon Musk told employees in a memo reviewed by The Wall Street Journal. “Higher volume and manufacturing design improvements are crucial for Tesla to achieve the economies of scale required to manufacture the standard range (220 mile), standard interior Model 3 at $35k and still be a viable company.”
The Silicon Valley auto maker turned a surprise profit in the third quarter and Mr. Musk had said he expected to do so again in the fourth quarter. In his memo, the CEO said unaudited results for the final three months of the year indicate Tesla made a profit less than the third quarter.
This morning, the following email was sent to all Tesla employees:
As we all experienced first-hand, last year was the most challenging in Tesla’s history. However, thanks to your efforts, 2018 was also the most successful year in Tesla’s history: we delivered almost as many cars as we did in all of 2017 in the last quarter alone and nearly as many cars last year as we did in all the prior years of Tesla’s existence combined! Model 3 also became the best-selling premium vehicle of 2018 in the US. This is truly remarkable and something that few thought possible just a short time ago.
Looking ahead at our mission of accelerating the advent of sustainable transport and energy, which is important for all life on Earth, we face an extremely difficult challenge: making our cars, batteries and solar products cost-competitive with fossil fuels. While we have made great progress, our products are still too expensive for most people. Tesla has only been producing cars for about a decade and we’re up against massive, entrenched competitors. The net effect is that Tesla must work much harder than other manufacturers to survive while building affordable, sustainable products.
In Q3 last year, we were able to make a 4% profit. While small by most standards, I would still consider this our first meaningful profit in the 15 years since we created Tesla. However, that was in part the result of preferentially selling higher priced Model 3 variants in North America. In Q4, preliminary, unaudited results indicate that we again made a GAAP profit, but less than Q3. This quarter, as with Q3, shipment of higher priced Model 3 variants (this time to Europe and Asia) will hopefully allow us, with great difficulty, effort and some luck, to target a tiny profit.
However, starting around May, we will need to deliver at least the mid-range Model 3 variant in all markets, as we need to reach more customers who can afford our vehicles. Moreover, we need to continue making progress towards lower priced variants of Model 3. Right now, our most affordable offering is the mid-range (264 mile) Model 3 with premium sound and interior at $44k. The need for a lower priced variants of Model 3 becomes even greater on July 1, when the US tax credit again drops in half, making our car $1,875 more expensive, and again at the end of the year when it goes away entirely.
Sorry for all these numbers, but I want to make sure that you know all the facts and figures and understand that the road ahead is very difficult. This is not new for us – we have always faced significant challenges – but it is the reality we face. There are many companies that can offer a better work-life balance, because they are larger and more mature or in industries that are not so voraciously competitive. Attempting to build affordable clean energy products at scale necessarily requires extreme effort and relentless creativity, but succeeding in our mission is essential to ensure that the future is good, so we must do everything we can to advance the cause.
As a result of the above, we unfortunately have no choice but to reduce full-time employee headcount by approximately 7% (we grew by 30% last year, which is more than we can support) and retain only the most critical temps and contractors. Tesla will need to make these cuts while increasing the Model 3 production rate and making many manufacturing engineering improvements in the coming months. Higher volume and manufacturing design improvements are crucial for Tesla to achieve the economies of scale required to manufacture the standard range (220 mile), standard interior Model 3 at $35k and still be a viable company. There isn't any other way.
To those departing, thank you for everything you have done to advance our mission. I am deeply grateful for your contributions to Tesla. We would not be where we are today without you.
For those remaining, although there are many challenges ahead, I believe we have the most exciting product roadmap of any consumer product company in the world. Full self-driving, Model Y, Semi, Truck and Roadster on the vehicle side and Powerwall/pack and Solar Roof on the energy side are only the start.
Tesla stock falls as layoffs, profit comment ignite demand fears
Jan 19, 2019
News of layoffs and a likely smaller fourth-quarter profit stoked investor fears about growth and demand at Tesla Inc., bringing the company’s shares down 13% on Friday.
“We think Tesla probably increased its employee base by more than it needed to last year, and is laying off some of those workers to bring down costs," said Garrett Nelson, automotive analyst at CFRA Research.
In a memo to employees reviewed by The Wall Street Journal and later posted on the company's website, Chief Executive Elon Musk said Tesla would post GAAP profits when it reports its fourth-quarter results, “but less than Q3.”
Tesla needs to be able to offer cheaper Model 3, particularly when U.S. tax credits drop further midyear, Musk said. Tesla’s headcount, which grew “more than we can support” last year, will be reduced by about 7%, he said.
“Tesla is entering a ‘fork in the road’ situation that will ultimately define the future of the company for years to come,” with production of mid-tier and base Model 3s ramping up as electric-vehicle tax credits roll off in the U.S., pressuring demand, Dan Ives at Wedbush said in a note Friday.
Nonetheless, tesla is likely to emerge as a stronger, more profitable, and more geographically diversified company in the next 12 to 18 months, Ives said, keeping his rating on the stock at the equivalent of buy.
Analysts at UBS said they had already thought the third quarter’s “high mix” was unlikely to be sustainable and would result in margin pressure for Tesla.
“With the federal tax credit being cut in half at the end of 2018, we see incremental demand pressure in Q1’19,” they said. Consensus estimates for the first quarter are around at $1.33 “and are likely inconsistent with ‘tiny profit,’” the UBS analysts, led by Colin Langan, said.
Also worryingly, the memo didn’t have “any color around future production targets” and the layoffs, the second in seven months, suggest “ongoing issues regarding labor planning and logistics,” the UBS analysts said.
“After ending 2018 with a Model 3 production run rate of <5k/week, despite indications for 10k/week initially and 7k/week more recently, we wonder if the company will ever be able to achieve a sustainable >5k/week Model 3 production value,” they said.
Reports Q4 2018 results on Jan. 30
current analyst estimates
EPS of $2.26 (FactSet), $2.25 (Estimize)
Revenue: $7.1 billion (FactSet), $7.145 billion (Estimize)
PALO ALTO, Calif., Jan. 18, 2019 (GLOBE NEWSWIRE) -- Tesla will post its financial results for the fourth quarter and full year ended December 31(st) , 2018 after market close on Wednesday, January 30(th) , 2019. At that time, Tesla will issue a brief advisory containing a link to the Q4 and full year 2018 Update Letter, which will be available on Tesla's Investor Relations website. Tesla management will hold a live question and answer webcast that day at 2:30pm Pacific Time (5:30pm Eastern Time) to discuss the Company's financial and business results and outlook.
What: Date of Tesla Q4 and full year 2018 Financial Results and Q&A Webcast
When: Wednesday, January 30(th) , 2019
Time: 2:30pm Pacific Time / 5:30pm Eastern Time
Shareholder Letter: Investors Overview | Tesla, Inc.
Webcast: Investors Overview | Tesla, Inc. (live and replay)
Tesla Gets Green Light to Start Delivering Model 3 in Europe
January 21, 2019
Tesla Inc. received permission to start selling its Model 3 in Europe, clearing the final hurdle in bringing the electric-car maker’s top seller to the home turf of Audi, BMW and Mercedes-Benz.
Deliveries should start in February for the Long Range Battery version of the midsize sedan -- the same variant first sold in the U.S. -- according to Tesla, after Dutch vehicle authority RDW issued the OK.
The European launch is crucial for Tesla as it navigates what Chief Executive Officer Elon Musk called a “very difficult” road ahead. The company is cutting jobs so it can profitably deliver lower-priced versions of the Model 3, Tesla’s first car targeted for the mass market. Musk has pointed to sales of the sedan in Europe and China as a main reason he isn’t concerned about any potential setback caused by a halving of the U.S. federal tax credit, to $3,750, on Tesla purchases as of Jan. 1.
With the Model 3, Tesla also has an opportunity to broaden its attack on the premium car market dominated by Germany’s BMW AG, Daimler AG-owned Mercedes-Benz and Volkswagen AG’s Audi. Tesla, based in Palo Alto, California, said in its third-quarter shareholder letter that “the midsized premium sedan market in Europe is more than twice as big as the same segment in the U.S.”
The Model 3 became the top-selling luxury car there last year, outstripping the Audi Q5, BMW 3 Series and other well-known models. Analysts and industry executives, however, have observed that competition with Tesla cuts across traditional categories.
“Teslas are stealing customers away from vehicles that you might not expect,” EvercoreISI analyst Arndt Ellinghorst said in a report last week, after Toyota Motor Corp.’s North American chief, Jim Lentz, discussed the impact of the Model 3 on the Prius, a hybrid that’s not marketed to luxury buyers. The Toyota executive said Tesla has created a new segment of so-called technology-driven products.
Tesla reported its second-consecutive quarterly profit Wednesday and better-than-expected sales, but its fourth-quarter earnings fell short of analysts' expectations and sent shares south after the markets closed.
The electric car maker's results and outlook for 2019 were not as bad as some had feared, but the automotive segment which still comprises the majority of Tesla's business was less profitable than some had expected.
Tesla's earnings were hit on a number of fronts, the company said, citing a decline in revenue from the sale of regulatory credits, higher import duties on parts from China as well as lower prices on the Model S and Model X in China and a lower-priced mid-range version of Model 3.
"This release was a mixed bag," CFRA analyst Garrett Nelson told CNBC. "The company generated strong free cash flow, which should ease balance sheet-related concerns, which is the biggest positive from this release in our view. Vehicle sales guidance for 2019 was a bit short of expectations, but not nearly the doomsday scenario some had expected resulting from the federal EV credit step-down."
On an unadjusted basis, Tesla made $139.5 million, or 78 cents a share, compared with a loss of $675.4 million, or $4.01 a share, during the last quarter of 2017.
Tesla said its cash position substantially improved by $1.45 billion, despite spending $230 million to repay convertible bonds during the quarter.
The company should see higher revenues in 2019 as it substantially ramps up production and deliveries this year, aiming for 360,000 to 400,000 vehicle deliveries, about 45 to 65 percent more than its deliveries in 2018.
Investors have been paying close attention to any indication of how profitable Tesla's cars are, particularly the Model 3 sedan. The $7,500 federal tax credit on every Tesla vehicle sold was cut to $3,750 at the beginning of the year, after Tesla sold its allotted 200,000 units that qualified for the full credit.
As that credit winds down, investors are keenly interested in whether demand for the Model 3 can stand on its own, particularly since the company has yet to release a version of the sedan at the $35,000 sticker price Tesla originally promised.
Eyes are watching whether Tesla needs to raise any more capital in the short term, especially given the fact that it needs to pay off $920 million in debt due on March 1. Bondholders can convert the debt into equity if the shares trade at or above the strike price of $359.87. But below that price, Tesla would likely have to pay off the notes with cash.
Q4 operating income stable compared to Q3 at $414M, operating margin of 5.7%
Operating cash flow less capex improved from Q3 to $910M in Q4
Cash and cash equivalents of $3.7B at Q4-end, increased by $718M in Q4
Q4 GAAP net income of $139M impacted by $54M non-cash charge
Model 3 GAAP and non-GAAP gross margin remained stable at >20% in Q4
. . .
Model 3’s success has carried over to our financial performance in Q3 and Q4 of 2018. Operating income in Q4 remained stable at $414 million despite a sequential decline in revenue from the sale of regulatory credits, higher import duties on components from China, a price reduction for Model S and Model X in China, and the introduction of a lower-priced mid-range version of Model 3. Our operating margin also improved significantly in the second half of 2018, changing from being negative to on-par with other premium carmakers. Despite margins in the automotive industry typically being lower in Q4, that was not true for us as our operating margin remained strong at 5.7% in Q4. Our GAAP net income of $139 million was impacted by a non-cash charge of $54 million attributable to non-controlling interests. Free cash flow (operating cash flow less capital expenditures) also improved sequentially in Q4 to $910 million. In the second half of 2018, our cash position improved by $1.45 billion despite the scheduled repayment of a $230 million convertible bond in Q4. We have sufficient cash on hand to comfortably settle in cash our convertible bond that will mature in March 2019.
In 2019, full-year Model 3 volumes will grow substantially over 2018 due to a full year of high production rates at our Fremont facility.
Model 3’s production rate progressively improved through Q4, with December 2018 being our highest volume month ever. In our Fremont facility, we are now past the steep portion of the production S-curve, and we expect our production rate to continue to gradually improve. Every part of the Model 3 production process has demonstrated over a 24-hour period the ability to produce at an extrapolated rate of 7,000 vehicles per week. By the end of this year, we expect to be able to produce Model 3 at this rate on a sustained basis.
As we improve the production rate of Model 3, the cost per vehicle continues to decline. It is critical that we continue this trend so that we can keep increasing the affordability of Model 3 while retaining a sustainable level of profitability. The labor hours per Model 3 vehicle declined yet again by roughly 20% compared to Q3 and by about 65% in the second half of 2018 alone. Despite introducing a lower-priced mid-range variant and other headwinds, Model 3’s gross margin remained stable in Q4 at over 20%.
The appeal of Model 3 continues to go far beyond the mid-sized premium sedan market. Our trade-in data suggests that consumers are significantly changing their purchasing habits in order to buy a Model 3. Of all trade-ins we’ve ever received from customers buying a Model 3, only 17% are other mid-sized premium sedans. Perhaps more surprisingly, almost 60% of these trade-ins are non-premium vehicles. We are also seeing that a significant number of Model 3 buyers are trading down in size from a larger car or a SUV to a Model 3.
In the past two years, Tesla vehicles have accounted for all of the electric vehicle (EV) volume growth in the US. Even with the radical EV growth in the second half of 2018, EVs still account for just 2% of the total US market, and there remains a substantial opportunity for EVs to continue to gain market share in the US and globally. Consumer purchases have demonstrated that EVs are becoming a preferred option, as EVs in Q4 2018 outsold hybrid electric vehicles (HEVs) in the US for the first time in history.
In Q4, we delivered 63,359 Model 3 vehicles to customers in North America. In January 2019, we started to produce Model 3 vehicles for Europe and China, and the car is now fully certified for sale in these markets. The market opportunity for Model 3 in Europe and China exceeds North America based on the most recent sales of mid-sized premium sedans. Model 3 was designed from the outset for a global market, and shares more than 98% of its parts in common across its regional variants.
Tesla names new chief financial officer, stock falls
Jan 30, 2019 6:44 p.m. ET
Tesla Inc. announced on a conference call Wednesday that Chief Financial Officer Deepak Ahuja will retire for a second time, and be replaced by vice president of finance Zach Kirkhorn. At the very end of a call related to Tesla's fourth-quarter earnings report, Chief Executive Elon Musk announced that Ahuja would retire "in the next few months" and become a senior advisor, and be replaced by Kirkhorn, who has been at Tesla since 2010. Ahuja previously retired from the car maker in 2015, but returned when replacement Jason Wheeler left in 2017. Tesla stock fell after the announcement, showing a 4% decline in after-hours trading.
Tesla guided for 2019 deliveries between 360,000 and 400,000 vehicles, which would be 45% to 65% year-on-year increase. Tesla said it expects a full-year profit and free cash flow.
Analysts at UBS said they expect the stock to trade flat in the next session on the mixed results and tepid first-quarter guidance.
Despite being marred by the adjusted-earnings miss, the results showed other strong fourth-quarter indicators for Tesla, said Bill Selesky, an analyst with Argus Research.
Highlights included falling costs, gross margins approaching the 25% goal, “strong and improving” December Model 3 volume, and the 7,000-vehicles-a-year goal for the Model 3 production rate, Selesky said.
Tesla is making smart moves to rein in costs while enabling faster Model 3 production, said Karl Brauer, an analyst with Kelley Blue Book.
“If Tesla can expand demand with a lower-priced Model 3, particularly in Europe and China over the next 12 months, there’s a realistic path to sustained profitability,” he said.
The Model Y is going to be a cash cow. Should've made that one first.
Elon said that they finished the engineering of the Y, it shares 76% of the parts from the 3, and will most likely be made that the Nevada Gigafactory. It should be cheaper for them to make (capex) because of the shared parts, all of the things they learned from Model 3 production hell that they can pass on to the Y, and they'll be making the vehicle in the same factory that they make the battery packs. Currently the 3 battery packs are made a Giga 1 and shipped to Fremont.
Tesla hasn’t been known for making many acquisitions, but we’ve now learned that it has reached an agreement to acquire ultracapacitor and battery component manufacturer Maxwell based in California.
It’s the automaker’s 5th important acquisition to date.
The all-stock transaction worth over $200 million was announced by Maxwell this morning and we reached out to Tesla to confirm the news.
Tesla confirmed that they reached an agreement with the company and commented:
“We are always looking for potential acquisitions that make sense for the business and support Tesla’s mission to accelerate the world’s transition to sustainable energy.”
Maxwell is best-known as an ultracapacitor manufacturer and it has also recently been talking about a dry electrode technology for batteries.
Dr. Franz Fink, President and Chief Executive Officer of Maxwell, commented on today’s announcement:“We are very excited with today’s announcement that Tesla has agreed to acquire Maxwell. Tesla is a well-respected and world-class innovator that shares a common goal of building a more sustainable future. We believe this transaction is in the best interests of Maxwell stockholders and offers investors the opportunity to participate in Tesla’s mission of accelerating the advent of sustainable transport and energy.”
Maxwell’s stock traded at just over $3.00 per share at market close last week for a valuation of $140 million.
Tesla has agreed to acquire them for $4.75 per share – making the transaction worth over $200 million.
The company is based in San Diego and it has about 380 employees.
Maxwell had been talking about a potential “strategic partnership” in the works for a few months regarding its dry electrode technology.
Aside from the new technology, the company also has its ultracapacitor business. They reported $91 million in revenue during the first 9 months of 2018.
Electrek’s Take
Tesla CEO Elon Musk first moved to California in the 90s in order to do a PhD on ultracapacitors, but he quickly stopped to start an internet company.
The technology has never been adopted by electric vehicle manufacturers who favored Li-ion batteries.
But Tesla’s acquisition of Maxwell might have little to do with ultracapacitors.
The automaker might be more interested with Maxwell’s dry electrode technology that they have been hyping recently.
Maxwell claims that its electrode enables an energy density of over 300 Wh/kg in current demonstration cells and they see a path to over 500 Wh/kg.
This would represent a significant improvement over current battery cells used by Tesla and enable longer range or lighter weight, but that’s not even the most attractive benefit of Maxwell’s dry electrode.
They claim that it should simplify the manufacturing process and result in a “10 to 20% cost reduction versus state-of-the-art wet electrodes” while “extending battery Life up to a factor of 2.”
I think this is really exciting.
Many companies have been making similar claims about batteries. Tesla, specifically Elon and JB, have often complained that they couldn’t verify those claims.
If Tesla is willing to pay $200 million for Maxwell, I have to assume that they verified the claims and they believe the technology is applicable to their batteries.
The Model 3's 2170 battery is estimated to be 247 Wh/kg, so 300Wh/kg for less would be
Tesla's delivery team said to be gutted in recent job cuts
The cuts could fuel investor worries that demand for the Model 3 in the United States has tailed off after a large tax break for consumers expired last year and the car remains too expensive for most consumers.
"There are not enough deliveries," one of the former employees told Reuters. "You don't need a team because there are not that many cars coming through."
When Tesla announced last month a second round of job cuts to rein in costs, one crucial department was particularly badly hit. The automaker more than halved the division that delivers its electric vehicles to North American customers, two of the laid-off workers said.
Some 150 employees out of a team of about 230 were let go in January at the Las Vegas facility that gets tens of thousands of Model 3s into the hands of U.S. and Canadian buyers, they said, in a sign the company expected the pace of deliveries to significantly slow in the near term.
12-26-2018, 10:16 PM
Weren't these things pre-ordered out for years? Why 3,000 sitting in inventory?
