Tesla to Miss Revenue Target by $315 Million

Tesla Motors Inc. appears to have missed its revenue target for the latest quarter by $315 million, suggesting the company is much better at selling cars than making them.

Breitbart News reported last month that Tesla’s CEO Elon Musk had told a shareholders’ meeting last month that the company, despite never meeting production goals, will revolutionize the auto industry to increase production over the next five years. He predicted that Tesla would profitable increasing production by 1,100 percent “through the magic of physics.”

But just four weeks later, Tesla had only built 14,370 cars versus a business plan to make 17,000 all-electric vehicles cars in the period from April through June. That amounts to revenue of about $1.7 billion on a production shortfall of about 15.5 percent.

The company’s under-performance increased versus the prior quarter ,when Tesla only missed revenue targets by 10 percent. As a result, full-year production guidance was reduced slightly from 80,000, to 90,000, to 79,180. But even that assumes Tesla can increase the production rate by 25 percent to about 50,000 cars in the last six months of 2016.

Elon Musk told shareholders that he was so intent on achieving an “extreme production ramp” that he moved his desk to the end of the assembly line. That may have helped the company build about 7,200 units in the last four weeks of the quarter, a rate double the production in each of the prior two months.

For most auto companies, missing revenue by $315 million would cause banks to pull credit lines and trigger a collapse. But investors have been willing to pony up seemingly endless amounts of cash over the last decade to fund operations — a phenomenal exception, given that in 2015 Tesla was losing $19,810 on each car it sold, and hemorrhaging negative cash flow of $51,344 on each vehicle it built.

But despite having a dangerous working capital position of negative $24.7 million, Tesla has funded the company by taking in about $370 million of new deposits over the last four months for future deliveries of its $35,000 “economy line” Model 3.

Tesla also faces a federal Office of Defects probe to determine if a “fatal highway crash involving a 2015 Tesla Model S operating with automated driving systems (‘Autopilot’) activated” was caused by faulty Tesla software that was released to drivers in “beta” mode. Another concern is that Tesla allowed its entertainment system to allow the driver to watch a Harry Potter movie while the auto-pilot was engaged.

According to Tesla, neither the Model S’s sensors nor the driver noticed a tractor trailer making a legal left turn in front of the car, because its white exterior was difficult to detect against the “brightly lit sky.” Tesla blamed:

“[t[he high ride height of the trailer combined with its positioning across the road and the extremely rare circumstances of the impact, ” which “caused the Model S to pass under the trailer, with the bottom of the trailer impacting the windshield of the Model S.”

It remains a unicorn, for now — but over time, Tesla is going to be compared to the auto industry for production efficiency and safety.