Tesla shares made their biggest one-day jump in nearly five years this week, after second quarter results call that featured apologies and promises – of a sustained production rate of 7,000 cars a week and a “sustainably profitable” business from Q3 onwards.
Tesla bulls crowed on Twitter as shares in the EV and battery maker – which has become the most shorted stock in the US market, for reasons we discuss here – rose by 16 per cent on Thursday, to $US349.54, leaving the short-sellers down more than $US1 billion.
— bourcastle (@bourcastle) July 31, 2018
Tesla shorts down over $1 bil today. It was going to be their grand day but the river card sunk them. Musk was pocket aces but you never know till the cards are dealt. Flop comes. Now the river is anothe ace. Game over. #tesla $tsla
— Ross Gerber (@GerberKawasaki) August 2, 2018
As MarketWatch notes, Wall Street seems to have been impressed by the form this quarter from CEO Elon Musk, who apologised to analysts he sparred with in the May conference call, and thanked his team for a “mind-blowing leap forward” in manufacturing.
#Tesla short recap as of 8/2 close: $TSLA up $48.70, short interest $12.3 billion. Shorts were down -$1.7 billion in mark-to-market losses today, year-to-date P/L is now in the red, -$1.44 billion. Did not see a lot of buy-to-covers today, expecting more over the next few days. pic.twitter.com/fVeB7Vb1KB
— Ihor Dusaniwsky (@ihors3) August 2, 2018
“We continued to achieve 5,000 Model 3s per week, or 7,000 combined S, X and 3, multiple weeks in July, showing that … we’re able to do this on a sustained basis,” Musk said in his opening comments.
Musk also said the company – which has faced major technical struggles to meet production targets for its mid-range Model 3 car – was aiming to get to 10,000 cars a week “as soon as we can.”
In a letter to shareholders before the call, Tesla said it aimed to produce 6,000 Model 3 sedans a week by late August, and a total of 100,000 Model S and Model X EVs for 2018.
At these production rates, Musk also believes the company can be cash flow positive from Q3 on, and was keen to get that message through.
“From an operating plant standpoint, from Q3 onwards, I really want to emphasise our goal is to be profitable and cash-flow positive for every quarter, going forward,” he said.
“Now obviously, if there’s a big recession or there’s a severe force majeure event that interrupts the supply chain, that’s not always possible, but we’re confident that in, provided the economy is roughly where it is today or reasonably good… (we can be) income positive and cash flow positive … every quarter from here on out.”
All that said, Tesla reported a loss $US718 million, or $US4.22 a share, in the second quarter, compared with a loss of $US336 million, or $2.04 a share, at the same time last year.
Revenue, however, rose to $US4 billion from $US2.77 billion a year ago.
Musk also used the earnings call to confirm the company’s plans to roll out other EV models, including the Model Y – to round out the S3XY offering – the Tesla Semi and the electric pick-up, or ute.
“Of course, long term, we’re going to do the Model Y and compact SUV. We’re going to do the pickup truck, the Semi, the next generation bus,” Musk said.
“Probably my personal favourite for the next product is the pick-up truck,” he added, “and we are going to just do an amazing pick-up truck.
“And the Model Y, compact SUV, probably the most popular car category in the world, so that’s like obviously going to sell pretty well. So a lot of cool things.”
Yes, a great deal of very cool things. But can it all be done?
Musk said the biggest “limiter” and “determinant” of Tesla’s growth, going forward, would be how fast the company could grow its battery production.
Read our separate report on Tesla battery production here.
Musk was also keen to advertise new US data that showed the top five cars people were trading in to buy a Model 3 were Toyota Prius, BMW 3 Series, Honda Accord, Honda Civic and Nissan Leaf.
This was significant, he said, because it showed consumers were motivated to “trade up” from their mainstream, mid-sized sedans and pay more for the Model 3.
“We’re obviously, at this point, not yet selling our $US35,000 car, so this is promising for the future. All right. Cool.” Musk said.