The company was forced to shut down its factory in Fremont, Calif., just as it was ramping up production for its Model Y, the crossover vehicle it expects to be its best-selling product. Musk outlined his concerns about that shutdown, saying the inability to resume production was a “serious risk” before launching into his missive. Musk has also been a vocal critic of coronavirus measures on social media, tweeting Tuesday night, “FREE AMERICA NOW.”
On the call, Musk called the coronavirus an “unexpected roundhouse” kick that “came out of nowhere.” He dropped an f-bomb in describing what he saw as “forcibly imprisoning” people in their homes “against [their] constitutional rights,” adding, it’s “not why people came to America.”
The comments followed Tesla posting a slight profit Wednesday, a lukewarm signal as worries mounted about the electric-car maker’s trajectory amid the global pandemic.
The company said first-quarter profit came in at $16 million, down compared with the past two consecutive quarters. In the same quarter a year ago, the company reported a $702 million loss. The company’s nearly $6 billion in quarterly revenue was up 32 percent year over year.
The company in early April already reported a record first quarter for production and deliveries of its vehicles lineup, consisting of the Models S, X, 3 and Y. Still, analysts have cautioned that the pandemic is likely to slice into production and render unlikely its target of half a million vehicles built in 2020.
Tesla echoed that concern, saying it might not hit that target as a result of the coronavirus. It also warned that cash flow and net income might be difficult to predict, so it would revisit its yearly guidance next quarter.
“It is difficult to predict how quickly vehicle manufacturing and its global supply chain will return to prior levels,” Tesla said. “For our US factories, it remains uncertain how quickly we and our suppliers will be able to ramp production after resuming operations.”
Chief financial officer Zachary Kirkhorn said Tesla is closely assessing the impact of the coronavirus downturn.
“In Fremont we’re working toward restarting production as soon as that’s possible,” he said. “However, unavoidably, the extended shutdown in Fremont will have an impact on our [near-term] financial performance.”
Still, Tesla’s stock rose more than 7 percent in after-hours trading to $861.07 as investors applauded the profit.
The record first-quarter performance surprised investors and analysts, who expected the company to have suffered some preliminary effects from the global impacts of the coronavirus, which ravaged China before the first cases of local transmission were reported in the United States toward the end of February.
Analyst Dan Ives of Wedbush Securities said Tesla’s ability to turn a profit in an environment constrained by covid-19, the disease caused by the coronavirus, sent the market a strong signal of the company’s financial viability that sent the stock surging.
“The fact that they’re navigating that storm as well as they are, now you’re going to have a stock that’s going to start to make its trek toward a thousand dollars,” he said.
Before his rant, Musk said on the call that Tesla had started spending more efficiently to better withstand the crisis.
“It has caused us to look closely at our cost structure and to be more efficient as a company,” he said. “We came to the conclusion that the right move is actually to continue to expand rapidly, continue to invest in the future in new technologies, even though it is risky.”
Tesla began delivering its Model Y crossover in March, a muted debut that coincided with widespread social distancing and shelter-in-place orders aimed at slowing the spread of the virus. Wednesday’s earnings report was the first indicator of demand for the small SUV, which has long been expected to be strong due to U.S. preference for that type of vehicle. Tesla said the crossover became the “first time in our history that a new product has been profitable in its first quarter.”
The Y’s debut may have provided some insight into why Musk initially resisted efforts to close businesses in the Bay Area, where Tesla is headquartered. Only after substantial intervention from local authorities last month did Musk agree to close up shop at Tesla’s Fremont factory.
Tuesday night, ahead of the earnings release, Musk repeatedly encouraged business to reopen. The tweets drew the ire of some elected officials who said Musk’s antics showed he was willing to put the health of Americans at risk for personal gain.
“By all accounts, 2020 was supposed to be Tesla’s year,” Jessica Caldwell, executive director of insights with research group Edmunds, said in a statement. “Its Shanghai factory was up and running, Model Y production and deliveries were ahead of schedule, and the company was making money while expanding its product lineup and operations. COVID-19 essentially robbed what would’ve been a home run for Elon Musk, so it’s unsurprising that he’s been leaning into the ‘Free America’ rhetoric on Twitter.”
Although some “die hards” will stick with the brand, Tesla faces problems including cheaper gas and a recession that is likely to cut into pocketbooks, said Karl Brauer, an auto industry analyst who serves as executive publisher at Cox Automotive. Luxury brands, which count Tesla among their ranks, tend to suffer during recessions.
“We looked like we were on the cusp of electric vehicles moving from niche to something more than niche,” Brauer said. “Nobody with a grounded perspective thinks that what has happened in the last two months is good for electric vehicles.”