Tesla production falls short, analysts predict another cash call

Tesla delivered much fewer vehicles during the first three months of the year than expected, though the quarter finished strongly.

The electric vehicle maker turned out 63,000 cars in the first quarter, disappointing analysts who expected the company to deliver around 76,000 cars.

Tesla warned that quarterly income will be “be negatively impacted” because of lower than expected delivery volumes recent cuts to selling prices.

Tesla shares were down almost 11% in premarket trading on Thursday to $260.67.

To maintain production to fulfill the pledge of 500,000 cars annually that CEO Elon Musk made recently, the company will have to pick up the pace in the following quarters.

Nevertheless, Tesla said it still expects to deliver between 360,000 and 400,000 vehicles this year, contrary to critics believing it has exhausted demand for the Model 3 in North America.

The company also revealed a strong exit rate of deliveries at the end of the quarter, having only delivered half the quarter’s numbers by 21 March, implying the delivery of 3,150 cars per day during the last 10 days of the month.

"Some may argue if Tesla had only 3 or 4 more days to deliver vehicles it could have surpassed consensus expectations in the quarter," said analysts at Morgan Stanley, who also calculated that the company burnt through $0.9bn of free cash in the quarter to leave a gross cash position of $1.9bn.

"While there are any number of moving pieces in working capital and ABL borrowing, we believe tonight’s delivery announcement could, by itself, be worth a further several hundred million of cash consumption in the quarter."

Tesla's management went out of their way to reassure that the group has "sufficient" cash on hand.

But analysts at Mirabaud Securities were certain Tesla would need to raise more cash, calculating that the quarterly loss would take net cash down to $1.8bn maybe, "plus we need to remember the accounts payable ($3bn) exceeds accounts receivable ($1bn) by $2bn so technically speaking things are probably rather uncomfortable".

"This company needs to raise money," said analyst Neil Campling. "Let’s pretend they issued 12m shares at $250. $3bn sorts out a lot of problems and increases the shares in issue by just 7%. Easy. Except…he is in court today so that might be tricky just now but at least something to think about whilst he is in the dock so to speak."

Looking further ahead, RBC Capital Markets said: “Waning S/X demand could face another hit later as this is where Tesla is first likely to face incremental EV competition that would also still qualify for the tax credit. Model 3 cannibalization is an issue because we don’t believe the Model 3 (especially the lower priced ones needed to access the next wave of demand) are as profitable as the S/X.”