Although Musk’s bold moves have taken investor’s fancy, sceptics and investors alike are holding their breath as to whether Musk will be able to deliver his promise on the Model 3.
Tesla Inc has reported a doubling of its profits in the first quarter of 2017-2018 and has suggested that the trend is likely to continue given the fact that its upcoming Model 3 is on schedule for July.
Elon Musk’s risk appetite for clean cars, clean energy and space exploration has fueled investor enthusiasm for Tesla.
Skeptics are however waiting to see whether Musk will be able to deliver over his promise of producing 6 times Tesla’s 2016 production, or 500,000 cars a year in 2018.
“We have seen some impact of Model S orders as a function of people being confused” that the Model 3 is an upgrade to the Model S, said Musk during a conference call.
Tesla has disclosed, it had $4 billion in cash as it headed into the second quarter and expects year-to-date capital expenditures to be in the order of $2 billion by the time it starts the production of the Model 3. This is within its earlier target range of $2 billion to $2.5 billion.
This cushion is likely to give Tesla some breathing space from needing to tap Wall Street for capital, said Efraim Levy, an analyst at CFRA Research.
In March Tesla had raised $1.2 billion from the market.
The company’s bottom lines have been helped by record deliveries and has seen its revenues jump to $2.7 billion in this quarter. However, its net loss has also widened to $330.3 million from $282.3 million a year earlier. This can be largely attributed to its acquisition of SolarCity.
Tesla’s future rides on the success of the Model 3. While much of the hype surrounding the company has been focused on the Model 3, Tesla is re-tuning its sales pitch to focus on the Model S as well.
It wants to ensure that the $35,000 Model 3, whose deliveries will begin only until 2018, does not canibalise parts from its higher-end cousin – the Model S, which starts at double the price tag of the Model 3.
“We want to be super clear that Model 3 is not version three of our car. Model 3 is essentially a smaller, more affordable version of the Model S with fewer features,” said Musk on a conference call while adding that buyers erroneously thought the Model 3 would be more advanced.
“The Model S will be better than Model 3,” he said. “As it should be, as it’s a more expensive car.”
Tesla has also reiterated its forecast of delivering 47,000 to 50,000 Model S and Model X cars during the first half of 2017.