Tesla revealed that it had eked out an unexpected profit in the first quarter of the year, despite a hit to the electric car maker’s business from what Elon Musk, chief executive, denounced as “fascist” government rules forcing businesses to close during the coronavirus outbreak.
News of the profit, which came from holding costs down as Tesla ramped up production at its new China plant and reached early profitability on its latest vehicle, the Model Y, fuelled a 9 per cent jump in the company’s shares in after-market trading.
Mr Musk was forced to close Tesla’s main production plant in May after fighting with local officials in the San Francisco Bay area, and has since been one of the most outspoken business leaders calling for a return to work. Late on Tuesday, he took to Twitter to declare: “Free America now.”
Speaking on a call with Wall Street analysts on Wednesday, the Tesla boss denounced shelter-in-place orders in the US as “outrageous” and an attack on people’s constitutional rights, and said they were causing a “serious risk” to the company. Pointing to the hardship at many of Tesla’s smaller suppliers, he said: “Everything people have worked for all their lives is being destroyed in real time.”
The shutdown at Tesla’s main plant prevented it delivering vehicles and led to the company burning through $895m of cash in the first quarter, double what many analysts had expected. The reversal followed three quarters of positive free cash flow totalling $2bn that had fuelled a surge in its share price.
Tesla’s cash in hand by the end of March
However, the bankruptcy worries that surrounded the company a year ago have evaporated following two rounds of capital raising, one completed just before the pandemic caused stock markets to swoon, and Tesla ended March with $8.1bn of cash on hand, up almost $2bn from the end of 2019.
Mr Musk said Tesla had not changed its investment plans as a result of the crisis, though he admitted it faced a “bumpy road” and did not provide the company’s usual financial guidance. “While other companies are cutting back on investment, we are doing the opposite. We are absolutely pedal to the metal,” he said, adding that Tesla might announce the location of its next car plant in the US within a month.
Tesla’s shares had already rebounded 120 per cent from a March low as several Wall Street analysts issued “buy” ratings for the company, betting that the health crisis would hold back would-be electric vehicle competitors and give Tesla the chance to consolidate its early lead in the market.
The company’s after-tax profit of $16m in the first quarter of this year — the first it has produced in its seasonally weak first three months — reflected a smoother ramp-up in production of new vehicle lines than Wall Street had become accustomed to. The performance pushed its automotive gross profit margin up to 25.5 per cent, the best in a year and a half.
Revenue for the quarter rose 32 per cent from a year before, to $6bn, with earnings per share of 8 cents, compared to a loss of $4.10. Wall Street had been expecting revenue of $5.9bn and a loss of 36 cents a share.
Tesla had already disclosed that it delivered 88,400 new vehicles in the first three months of the year, around 9,000 fewer than expected before the crisis hit but still more than many on Wall Street had been expecting.
*This article has been amended from the original to record the net profit was $16m in the first quarter
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