TO THOSE WHO WAIT

Elon Musk got emotional at Tesla’s shareholder meeting and had something for everyone

Few doubts were on display at Tesla’s annual shareholder meeting on Tuesday (June 5). The gathering of Tesla fans and shareholders capped several rough months for the company as it struggled to meet production numbers, and Wall Street expectations.

CEO Elon Musk took the moment to double down on his vow that Tesla will achieve profitability later this year, declaring he was “expecting positive GAAP net income and positive cash flow in Q3 and Q4.” Tesla was not planning to raise any “incremental debt or equity” financing, he stated.

During a presentation, and more than an hour of questions, Musk seemed buoyant, at times overcome with emotions, as he ticked off the company’s achievements: the Model 3’s ranking as a top-selling premium sedan in the US, installation of one gigawatt-hour of energy storage, the 2020 production plans for the Model Y and revamped Roadster. And, of course, the belated growth in Model 3 production. “It’s like whew, this is, like, I tell you the most excruciating hellish several months I’ve maybe ever had, and a lot of other people at Tesla,” Musk said. “But I think we’re getting there.”

His 30-million strong Twitter following gave the executive plaudits.

But a few questions pressed Musk on Tesla’s Model 3 woes. The company only managed to produce 2,020 Model 3 vehicles in the last week of March, well short of the 2,500 per week it promised earlier this year (and nowhere close to the 20,000 Model 3’s originally projected). One person asked whether people should discount Musk’s prediction in the future given the Model 3’s long delayed ramp up. “I do think I have an issue with time,” Musk replied. “This is something I’m trying to get better at. I’m a naturally optimistic person. I’m trying to recalibrate these estimates as much as possible.”

Another asked if Musk would still honor the $35,000 price advertised for the Model 3. Tesla has focused on high-priced configurations, some exceeding $70,000, since the car began rolling off assembly lines in 2017. That’s eased the carmaker’s cash burn, but some Model 3 reservation holders sought assurances their wait wouldn’t be for naught. Musk assured them that a $35,000 Model 3 would be delivered by the first quarter of 2019. “We will honor that obligation” to deliver at that price, he said, “and we would do so now if it was physically possible.” He did not mention if the $35,000 figure included a $7,500 US tax credit to buyers of electric vehicles.

If Tesla makes good on that promise, it may assuage some investors’ fear. Tesla stock has fallen 9% this year, and short sellers are raising their wager as well. The volume of Tesla shares shorted has surged 28% in 2018

Now, everything is riding on Model 3 production. Tesla has had two profitable quarters over its 14-year history. It could have another if everything goes right with the Model 3. But Tesla has a lot on its plate. The company is producing its Semi truck, the Model S sedan, the Model X SUV, the “mass-market” Model 3, the upcoming Model Y crossover, a SolarRoof, commercial and residential solar panels (inherited from its SolarCity acquisition), two Gigafactories producing batteries and solar panels, and an energy storage business. That’s on top of of Musk’s personal involvement in SpaceX, The Boring Company (subterranean tunneling), Neuralink (implantable brain-computer interface), OpenAI (artificial intelligence safety) and his recently announced Pravduh, a riff on pravda, the Russian word for “truth” and the former Soviet state propaganda publication. (This last project—a credibility ranking for journalists and publications—came as Musk launched into an offensive against the press on Twitter, although this seems to have died down in recent days.)

Musk seemed confident everything was back on track with the Model 3. He said the third assembly line in its Fremont, California, plant will come online soon, ensuring production will hit 5,000 cars per week by the end of June. History suggests it would be wise not to place one’s bet on that just yet.

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