Tesla sticks by Model 3 target, posts worst ever quarterly loss

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SAN FRANCISCO (Reuters) – Tesla Inc said on Wednesday it was sticking with Chief Executive Elon Musk’s revised production targets for its Model 3 electric sedan, but posted its worst-ever quarterly loss, and warned that spending would increase slightly this year.

Shares of the Palo Alto, California-based company were up about 0.45 percent in extended trading.

Money-losing Tesla’s long-term viability depends on annually selling billions of dollars of Model 3s, the new sedan that starts at $35,000, about half the price of its flagship Model S.

Production delays have curtailed deliveries of the vehicle to customers – only 1,550 deliveries in the fourth quarter, far below the 4,100 vehicles expected by analysts – meaning revenue from the highly anticipated vehicle has yet to hit Tesla’s bottom line.

Tesla stuck by its previous production target made in January – which had been pushed back twice previously – that it expected to build 2,500 Model 3s per week by the end of March, and 5,000 by the end of the second quarter. Yet on Wednesday it cited the difficulty of accurate production forecasts, leaving the door open for more delays.

Tesla spent $787 million (567.08 million pounds) in capital expenditures in the fourth quarter, below its projections, but said capital spending would be “slightly more” this year, than last, given expanded production at its Fremont factory and Nevada Gigafactory.

Other new projects requiring high upfront investment include the recently unveiled Tesla Semi to the upcoming Model Y SUV and a factory in China. Tesla said in November that Tesla was “well capitalized” for the delayed Model 3 production schedule.

Tesla ended the fourth quarter with $3.37 billion in cash, just below the $3.5 billion in the previous quarter. Earlier this month, the company raised $546 million in securitised notes backed by Model S and X lease payments, the first time Tesla has securitised its leases.

The niche carmaker has made inroads among luxury car buyers with the advanced technology and innovative design in its Model S sedan and Model X SUV. Nearly two years ago, taking the industry by surprise, Musk proclaimed Tesla would produce 500,000 vehicles in 2018, mostly Model 3s, a six-fold increase over 2016 levels.

Musk’s oversized ambitions, if realized, could allow the billionaire to earn as much as $55.8 billion in Tesla stock in the next decade under a new compensation plan that prioritises a 10-fold boost in the company’s market value over profitability.

Tesla’s soaring stock – fuelled by belief in the long-term prospects of the company – has now made the company the second-most valuable U.S. automaker, just behind General Motors Co, which had net revenue of $145.6 billion in 2017.

Automotive gross margin, which excludes the sale of zero emission vehicle (ZEV) credits, fell to 13.8 percent from 22.2 percent last year. Analysts on average had expected margins of 15.7 percent, according to FactSet.

Net loss widened to $675.4 million, or $4.01 per share, for the fourth quarter ended Dec. 31 from $121.3 million, or 78 cents per share, a year earlier.

Total revenue rose to $3.29 billion from $2.28 billion.

Excluding items, the company lost $3.04 per share. Analysts were expecting a loss of $3.12 per share, according to Thomson Reuters I/B/E/S.

Shares of Tesla have fallen 10 percent from a 12-month high of $385 in September, but are up 10 percent from January.