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Leadership / Digital Transformation

Elon Musk’s Roadster may be off track, but can Tesla deliver Model 3 on time?

Elon Musk may have launched his Roadster into orbit this week, but are Tesla’s financial targets out of this world?

One of the world’s most hyped car companies has posted its worst ever quarterly loss, with Tesla draining $675.4m (£487) Q4 2017, five times the $121.3m lost in the equivalent period the year before.

In the three months up to the end of 2017, Tesla posted a gross profit of $438.8m, boosting the year’s entire profit to $2.2bn. Yet hefty losses from operating expenses sent Tesla’s net losses in 2017 skyrocketing to $1.96bn.

Musk’s SpaceX launched his personal red Roadster into outer space on the Falcon Heavy rocket on Wednesday. However, subsequent data from NASA indicated the publicity-stunt-payload will not make it into Mars’ orbit, as the entrepreneur and inventor had originally hoped.

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South African-Canadian tech entrepreneur Elon Musk sent a Roadster car with a dummy astronaut and cameras into space on Wednesday.

 

Although his sports car has veered off course, Musk is confident his mass automobile manufacturing will soon be back on track. Tesla is set to stick to its production target of 5,000 Model 3 cars per week by Q2, according to a letter from the firm’s CEO and CFO. The company has endured numerous setbacks stalling production of its latest Wi-Fi and LTE-connected sports car which set it back 6 months later than expected. Issues had been sparked by a malfunction of an automated assembly line in the Gigafactory battery manufacturer.

“At some point in 2018, we expect to begin generating positive quarterly operating income on a sustained basis,” the automotive company wrote in a letter to shareholders. “With the planned ramp of both Model 3 and our energy storage products, our rate of revenue growth this year is poised to significantly exceed last year’s growth rate.”

Speaking about his penchant for setting ambitious deadlines, Musk admitted on a call to FT analysts his company had been “a little complacent, a little overconfident” in its plans. Nevertheless, Musk’s letter to shareholders promised “we are ramping up production significantly” as the company remains fixed on injecting more eco-friendly cars into the mainstream automotive industry.

After hitting the 5,000 per week target at the end of Q2 2018, Tesla promised it would add enough capacity to production lines to reach 10,000 units per week. The company delivered 1,542 Model 3 vehicles in Q4.

In 2016, Tesla posted a -11.78% return on investment and a net income for the fiscal year of -$674.91m.

Tesla opened 12 new retail and services centres at the end of 2017, bringing its total worldwide premises count to 330.
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