Tesla reported first-quarter earnings on Wednesday and lost slightly less money than analysts expected. Revenue, at about $3.4 billion, was what analysts figured on.
Tesla also addressed its much-discussed cash needs. In a letter to investors, the company said that it spent down from $3.4 billion in the final quarter of 2017 to $2.7 billion in Q1 2018 — and that it would reduce its 2018 capital needs to $3 billion from a predicted $3.4 billion.
CEO Elon Musk has said that Tesla wouldn’t require new funding in 2018, in either equity or debt. On a call with investors, in response a question from Morgan Stanley analyst Adam Jonas, Musk said that when it comes to raising new money, “I specifically don’t want to.”
It’s costing Tesla about a billion per quarter to run its business, and revenue was relatively flat from Q4 2017 to Q1 2018, with auto sales rising only about $150 million despite significantly increased deliveries of the mass-market Model 3 vehicle.
So unless revenue rises substantially and operational costs remain stable — a tricky proposition as Tesla is still struggling to get Model 3 manufacturing in track — Tesla will spend itself down to either nothing on the cash-balance side or end up with about $1 billion in reserve, give or take a few hundred million.
That’s about how Tesla likes to end up a year, but it’s tight for a carmaker that could finish 2018 with production of something like 200,000 cars, optimistically.
This does raise the question of why Tesla wouldn’t go ahead and issue some new equity at between $250 and $300 per share (the stock was trading at over $300 on Wednesday). That would provide some margin for error, and investors would likely tolerate it.
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