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Tesla Delivers More Cars—and More Losses

On one hand, Tesla is making and selling cars. Wednesday, the company said it had delivered 95,356 vehicles in the second quarter of 2019, beating its own record of 90,966, from the end of 2018. That’s a year-over-year increase of 134 percent. The figure also beat Wall Street’s prognostications and seemed to signal that the electric-car maker was ready to climb out of an early 2019 slump and get back to saving the world via four wheels.

On the other hand, Tesla isn’t back to making a profit yet. The company also reported it lost $408 million in the second quarter. That’s an improvement over the prior quarter, when it reported a $702 million loss; but the loss was still larger than Wall Street analysts’ expectations, which were already pretty grim. The company’s stock price fell more than 10 percent in aftermarket trading. Tesla also said longtime CTO and cofounder JB Straubel would step down to become a senior adviser to the company. Company vice president of technology Drew Baglino will take over some of Straubel’s responsibilities.

As Tesla becomes, increasingly, a manufacturer of “affordable” electric vehicles instead of luxury ones—just 18.6 percent of its deliveries last quarter were its higher-margin luxury Model X and Model S—the company still appears to be looking for a path to long-term profitability.

For that, Tesla is publicly casting its eyes to its next big thing: production of the Model Y compact SUV, which is slated to begin in fall 2020. “The story for Tesla’s future is fundamentally Model 3 and Model Y,” CEO Elon Musk told investors on a call Wednesday evening. He projected that “in a couple years” customers would demand about 750,000 Model 3’s and 1.25 million Model Y’s per year, compared with 80,000 to 100,000 S’s and X’s. With Tesla’s planned pick-up truck and semitruck, the share of Model S’s and X’s “gets smaller and smaller,” he said. (Neither Tesla’s shareholder letter nor the investor call offered an update on the timelines for the Tesla pick-up or semi, though Musk indicated in June that a pick-up truck might be unveiled “some time towards the end of summer.”)

The letter said the company expects the Model Y to be a more profitable product than the Model 3.

Even so, Musk and company said they weren’t quite sure why Model S and X deliveries have fallen 21 percent since last year. He chalked some missed sales up to a “communication” issue and said he believed some customers were waiting for new versions of the S and X before purchasing a vehicle. He emphasized that no big refresh was coming.

Tesla also appears to be pinning serious hopes on its factory in Shanghai, where it says machinery is being put into place for a Model 3 production line. The company says it’s on track to begin production there by the end of the year. China’s aggressive electric-vehicle sales goals makes it an ideal market for the EV company, but the country also places heavy import taxes on automobiles built elsewhere. Tesla hopes its new factory will boost demand for its cars in the country. Musk also said Tesla would finalize a location for a European Gigafactory by the end of the year.

As for Tesla’s futuristic car tech: well, it still seems to be in production. The investor letter indicated that the company’s “Enhanced Summon” feature, which Musk has long promised would allow a driver to summon a car from a parking lot, is still in development. “We are making progress towards stopping at stop signs and traffic lights,” the letter read—which seems pretty vital. Musk predicted earlier this year that Tesla would have 1 million robotaxis on the road in 2020, though technology experts have cast doubt on that claim.

Tesla said it is still on track to produce 360,000 to 400,000 vehicles this year, which would require more than doubling its output from the first half. Musk urged investors to focus on the positive. The company’s output has increased dramatically in recent years, he pointed out. “We didn’t evolve to feel an exponential” rate of increase, he said. “We can feel a linear, but we can only understand an exponential at a cognitive level. But Tesla is expanding at an exponential rate.”

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