Tesla Reports Another Big Loss, But See Only Profit Ahead

Tesla recorded another huge loss last quarter and burned through hundreds of millions of dollars in cash as it ramped up production of its first mass-market model.

But the electric-car maker intends for that loss to be its last.

Tesla is about to turn the corner, Elon Musk, the chief executive, told analysts and investors Wednesday during a conference call after the company announced its quarterly results.

“Our goal is to be profitable and cash-flow positive for every quarter going forward,” Musk said. Outside of a recession or major economic shock, the company is confident that it can reach that target, he said.

Investors liked the promise. Tesla’s stock rose about 9 percent in extended trading, after closing at $300.84.

The quarter that ended June 30 was a crucial one for Tesla in its quest to build a successful future around the Model 3, the more affordable sedan it is offering alongside the flagship Model S sedan and the Model X SUV. To meet its Model 3 production goals, the company set up a tent at its factory in Fremont, California, to augment its assembly line, and Musk said he had taken to sleeping at the plant.

Tesla used up more than $430 million of its remaining cash during the quarter, decreasing its cash supply to $2.2 billion. But analysts had braced for worse.

“I was expecting more cash burn,” David Whiston, an analyst at Morningstar.

In late June, Tesla passed a milestone, producing 5,000 Model 3s in a week — the benchmark it has said it needed to reach to become profitable. In July, it maintained that production pace “multiple times,” the company said Wednesday.

The output it anticipates in the third quarter — 7,000 vehicles per week across its entire fleet, or 350,000 per year — “should enable Tesla to become sustainably profitable for the first time in our history,” the company said in a note to investors.

That would be a significant accomplishment for a company that has never reported an annual profit — its latest quarterly loss was $743 million on $4 billion in revenue — and some analysts remain skeptical. The goal is plausible but could easily be derailed by production glitches, delivery delays and softer-than-expected demand for the Model 3, said Brian Johnson, an analyst at Barclays.

Tesla has set a base price of $35,000 for the vehicle, but it is taking orders only for versions that start at $49,000.

“We still have fundamental concerns with the actual demand for the higher-priced variants,” Johnson said.

Tesla’s ambitions — its stated corporate mission is to “accelerate the world’s transition to sustainable energy” — are expensive. Its dwindling financial safety net has prompted some analysts to predict that it will soon need to raise more money, but Musk strongly disputed that on Wednesday’s call.

“We will not be raising any equity, at any point,” he said. “We certainly could raise money, but I think we do not need to. I think it’s better discipline not to.”

In June, Tesla, which is based in Palo Alto, California, laid off 3,500 employees, around 9 percent of its workforce, to reduce its operating costs. It recently made the unusual move of asking some suppliers for price reductions on work already underway.

The amount that Tesla owed its suppliers ballooned in the second quarter, which may have helped the company conserve cash. Its accounts payable, the balance-sheet item for yet-to-be-paid bills, totaled $3 billion at the end of the second quarter, an increase of more than $425 million from the first quarter.

But its big bets keep growing. Last month, Tesla announced plans for a vast new plant in China, its first outside the United States, that it hopes will eventually make 500,000 vehicles a year.

That factory will be paid for with loans from Chinese banks and “local debt,” Musk said Wednesday. On his call with analysts, Musk adopted a much softer tone than he did last quarter, when he criticized what he called “boring, boneheaded questions.” He apologized Wednesday for his earlier remarks.

“There’s really no excuse for bad manners,” he said. “There are reasons for it. I’ve gotten no sleep and been working sort of 110-hour, 120-hour weeks. But nonetheless, there’s still no excuse.”

Musk also apologized for rambling at times on Wednesday’s call.

“Sorry if I sound a little tired,” he said. “I’ve been working like crazy in the body shop lately.”