Tesla Lost Nearly $2 Billion in 2017
When news broke that Tesla had only built about 2,400 Model 3s in the fourth quarter of 2017, it wasn’t much of a surprise. Yes, CEO Elon Musk had previously said that by December, Tesla would be building 20,000 Model 3s per month, but Musk also has a history of making overly optimistic predictions. Plus, as we learned at the end of Q3, Model 3 production was being held up by “manufacturing bottleneck issues.” The bigger question was how badly these production delays would impact the company’s finances. Today, we learned the answer to that question, and it sounds pretty bad.
Tesla released its Q4 earnings today, and while revenue totaled $3.29 billion, a year-over-year increase of slightly more than $1 billion, quarterly losses totaled $675.4 million. Because the California-base automaker has invested so much money in building factories, expanding production capabilities, and developing new vehicles, it usually posts a loss each quarter, but Q4’s loss was the largest in company history. Tesla also posted a $1.96 billion loss for the year.
Interestingly, as Forbes points out, Tesla significantly increased profits from its sale of zero-emission vehicle credits to other automakers. In the last quarter of 2016, it sold $20 million in ZEV credits, but a year later, fourth quarter credit sales had increased to $179 million. Customer deposits also increased from $663 million to $858 million.
In a letter to investors, Tesla acknowledged “the slower than planned production ramp of Model 3,” offering new weekly production targets of 2,500 Model 3s by the end of Q1 2018 and 5,000 by the end of Q2. The same letter also cautioned that “while these are the levels we are focused on hitting and we have plans in place to achieve them, our prior experience on the Model 3 ramp has demonstrated the difficulty of accurately forecasting specific production rates at specific points in time.” Tesla then went on to say that once it hits that 5,000-per-week goal, it plans to expand again, increasing weekly Model 3 production capacity to 10,000.
Forbes also reports that Tesla told investors, “2018 will be a transformative year for Tesla, with a high level of operational scaling. As we ramp production of both Model 3 and our energy products while keeping tight control of operating expenses, our quarterly operating income should turn sustainably positive at some point in 2018.”
Tesla’s predictions for 2018 sound optimistic, but it’s still not entirely clear what has caused the Model 3 production delays or how Tesla plans to fix them. The letter to investors promised the company was “taking many actions to systematically address bottlenecks and add capacity in places like the battery module line where we have experienced constraints,” but it didn’t go into detail about the “bottlenecks” themselves. And until Model 3 production actually increases to meet predictions, it’s hard to be as optimistic about 2018 as Tesla is.