Musk admits IPO regret as Tesla sees demand for EVs fall in 2019

25 Apr 2019

A Tesla Model 3. Image: Tesla

Elon Musk was in a somewhat sombre mood during a Tesla investor call after its Q1 earnings for 2019 showed substantial losses.

Tesla has fallen wide of the mark when it comes to meeting expectations of its quarterly earnings so far this year.

In its posted results, the electric vehicle (EV) maker made a loss of $2.90 per share versus the $0.69 expected loss. Meanwhile, its revenue for the quarter came in at $4.54bn versus an expected $5.19bn.

This puts its total losses for 2019 so far at $702.1m, which, as CNBC points out, is slightly less than this point last year when it posted a loss of $709.6m. The unexpected scale of the loss, however, resulted in its share price falling by 2pc.

While greater than imagined, to some degree Tesla tried softening the blow prior to the posting of results, saying that its finances would be “negatively impacted” because of “lower-than-expected delivery volumes and several pricing adjustments”. In figures, this amounted to 63,000 cars delivered versus the considerably larger number of 76,000 that analysts predicted.

The biggest worry for Tesla, and founder Elon Musk, was the serious drop-off in demand compared with Q4 2018. Despite sales rising 36pc to $3.72bn compared with $2.74bn a year ago, this is down 41pc compared with Q4.

Plans to launch insurance product

Aside from buyers rushing to claim a $7,500 US federal tax credit that was expiring on 1 January, Musk suggested a decline in Q1 2019 was based on a belief that people don’t like buying cars in the winter.

On an investor call, however, Musk admitted: “I would prefer we were private, but that ship has sailed.” He added that being a public company was a distraction but he wasn’t “sure what to do about it”.

This comes as no surprise given his previous comments that got him in quite a bit of trouble with the US Securities and Exchange Commission.

What investors will be interested in going forward is future demand for the Model 3 car, sold as the company’s entry-level EV. While originally priced at $35,000, rising costs of production saw this raise to its current price of $50,000 in North America.

In addition to recently promising the launch of a ride-hailing robotaxi service that would use existing customer vehicles, Musk said in the investor call that Tesla plans to get into the car insurance game. He also hinted at the idea that it will use driver data to set rates for customers.

Updated, 12.08pm, 25 April 2019: This article was amended to clarify that Tesla vehicle sales rose 36pc, not 34pc, and that the total loss figure for 2019 so far is $702.1m, down from $709.6m a year ago. A previous version included these figures as billions.

Colm Gorey was a senior journalist with Silicon Republic