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Holly LaFon
Holly LaFon
Articles (9132)  | Author's Website |

Elon Musk’s Tesla Shareholder Meeting Highlights: China and No New Cash

Musk makes several new announcements and big promises

June 06, 2018 | About:

Elon Musk addressed Tesla (NASDAQ:TSLA) shareholders at its annual meeting Tuesday, making several new announcements and big promises.

The market reacted strongly to Tesla’s vision, with shareholders trading the stock up 4% since Tuesday morning to around $312 a share Wednesday.

Questions have surrounded the electric car maker’s ability to meet its ambitious manufacturing targets and needs to raise cash. Musk addressed the problems while owning up to mistakes Tesla has made in scaling its production. Not for the first time, he compared the company to Ford.

“It’s very difficult to become a mass manufacturing car company. No one has succeeded in doing this in a very long time in the United States. And even the ones that have only Ford is the only one that hasn’t gone bankrupt. So it’s super difficult,” Musk said. “So in fact yeah an issue with the American auto industry, it’s always worth bearing in mind that only two have not gone bankrupt, and it’s Ford and Tesla. It’s insanely hard just staying alive. Just want to be clear it’s really difficult.”

Production

On production, Musk assured investors that the company would meet targets it has failed to reach before. Tesla announced in April that it missed its goal of producing 2,500 Model 3s per week by the end of the first quarter. Some analysts have forecast that it would also fall short of its promise to attain 5,000 of the mid-priced cars by the end of the second quarter, which Musk countered in his speech.

All parts of the Model 3 production system have been able to produce 500 cars per day, or 3,500 car-per-week capability, he said. After a set of upgrades to production lines, the company is “quite likely” to achieve 5,000 cars per week by the end of the month.

“We’ve made a lot of mistakes with Model 3 production but we recognize those mistakes and we’re confident we know how to address them,” Musk said. “As a matter of fact we are addressing them. And long term I think the biggest competitive strength of Tesla is going to be manufacturing. This is sort of counterintuitive but it is going to be quite dramatic I think.”

One of the mistakes the company made was trying to automate things that are easy for a person to do but difficult for a robot to do. Instead, he wants to lean toward automating the parts of the process that cause injuries or are difficult for people to perform.

The company also launched production on a third assemble line two to three weeks ago and has already begun to put its first car through the line. “It gives me confidence about the 5k Model 3s per week,” Musk said. “We can probably get to 5k per week with two assembly lines, but with the third I’m highly confident.”

On batteries and Gigafactories

Tusk made several big projections on Tesla’s battery capacity. By next year, he expects the Gigafactory to make more battery capacity than all other electric vehicle manufacturers combined, including China, and he promised to add another gigawatt.

Whether Tesla can beat $100 per kilowatt hour at the cell level by the end of the year depends on commodity prices. Within two years, he expects to get below $100 per kilowatt hour at the pack level, the “key figure of merit for a car.”

The current Gigafactory, set to be the biggest building in the world, will not be completed for at least four to five years. Future factories will include both battery and car production, and new ones will begin appearing around the world, such as in China.

China Gigafactory

Tesla announced it will build its first Gigafactory outside of the U.S. in Shanghai, China, after holdings talks with the country’s government. Plans for the factory will not emerge until next month. It also plans to build a factory in an undetermined location in Europe, with details expected by the end of the year. The company plans to build 10 to 12 factories worldwide.

On finances

Tesla expects GAAP net income and positive cash flow in the third and fourth quarters.

Musk repeated previous statements about the company’s capital needs.

“And we, as I’ve said before, do not expect to need to raise any incremental debt or equity,” he said.

About the author:

Holly LaFon
I'm a financial journalist with a master of science in journalism from Medill at Northwestern University.

Visit Holly LaFon's Website


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Comments

jazzenjohn
Jazzenjohn - 5 months ago    Report SPAM

Elon Musk is setting up a perfect Short Squeeze. He has several real and sensible reasons for not Selling 5000 per week by the end of June, that being downtime where he's installing new equipment he recently had shipped in, and more importantly, he's very near the 200,000 limit for the Federal Tax credit. If he hits that number in June, his customers only get 3 more months of the full $7500 credit, but if he waits till July 1st to hit 200,000, then they gets 6 months of the full credit before it is halved. That doesn't mean he can't have customers configure them and build them and have them parked all around waiting for July 1st and then a MASSIVE number of sales and full bore manufacturing! He'll be able to tout that for a full month before the second quarter results come in, and they may not be anywhere near as bad as some bears think because he will have gotten the $2500 configuration fee and sales and revenue will have gone up pretty significantly, and the trimming of spending will start to show up too. But the third quarter will have a Huge jump start and there is plenty of good news to tweet about... Bears can point out the aspirational date of manufacture of the Y and quibble about production rates but it will be drowned out by the Real Numbers going on now. Production has doubled in the last month or two and may well hit the magic 5000 he talks about. While I'm skeptical about the long term value of Tesla, in the short term, it is looking spectacularly good! I have some short term call options on Tesla and a few long term puts.

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