Tesla posts worst ever quarterly loss as cash burn accelerates

Tesla posted a record $709.6 million US net loss in the first quarter and burned through $745.3 million in cash while struggling to crank out large numbers of its Model 3 mass-market electric car.

The loss and cash burn announced Wednesday raised questions about the company's future and whether it will be able to pay all of its bills by early next year without more borrowing or another round of stock sales.

Tesla said its net loss amounted to $4.19 per share. Excluding one-time expenses such as stock-based compensation, the company lost $3.35 per share. Revenue grew by 26 per cent from a year ago to $3.4 billion.

The giant loss in a critical quarter for the 15-year-old company fell short of Wall Street estimates. Analysts polled by FactSet expected an adjusted loss of $3.54 per share. Revenue, however, exceeded estimates of $3.28 billion.

In April, Tesla said it wouldn't need to return to markets for more capital because it expected to generate cash from sales of the Model 3. But it has had trouble getting them out the door to several hundred thousand people who put down $1,000 deposits to order one.

Moody's Investor Service downgraded Tesla's debt into junk territory back in March, warning at the time that Tesla didn't have cash to cover $3.7 billion for normal operations, capital expenses and debt that come due early next year. At the end of last year the company had a total of $9.5 billion in long-term debt.

"The negative outlook reflects the likelihood that Tesla will have to undertake a large, near-term capital raise in order to refund maturing obligations and avoid a liquidity shortfall," Moody's wrote in a note to investors.

Model 3 production issues

Tesla Inc.has had only two profitable quarters in its nearly eight years as a public company.

The key to raising cash to cover expenses is production of the Model 3 mass-market electric car, which starts at $35,000 but can easily top $50,000 with options. Production problems have been so bad that CEO Elon Musk has tweeted he's sleeping at the plant and that automation is overrated and more humans are needed to build the cars.

The plant has wildly missed Musk's forecasts. When production started last summer he promised to build 20,000 Model 3s during the month of December. Instead, Tesla made only 2,425 during the entire fourth quarter.

Then Tesla forecast 10,000 Model 3s per month at the end of the first quarter. As it turned out, just under 9,800 were assembled from January through March, Tesla said in April. The Fremont factory was shut down for four or five days last month to clear production bottlenecks, Tesla said.

The company, which also makes solar panels, predicted in April that production will climb rapidly through the second quarter and reach about 5,000 vehicles per week which would return Tesla to its originally promised 20,000 per month rate around the end of June. It predicted high sales and strong cash flow in the third quarter.

"As a result Tesla does not require an equity or debt raise this year, apart from standard credit lines," the company said.

The Model 3 is the most important piece of Tesla's plan to become a mainstream automaker. At one point it had more than 500,000 potential buyers on a waiting list. But in April the company conceded that some had cancelled, although it refused to give numbers. Tesla said reservations "remained stable" through the first quarter.