Tesla's Musk 'sees merit' in capital raise, vows profit in Q3 after large loss

San Francisco

TESLA Inc chief executive Elon Musk suggested on Wednesday a capital raise could be imminent, as the electric vehicle maker lost US$700 million in the first quarter and predicted a return to profit in the third.

Tesla plans to resolve logistics issues with global vehicle deliveries after weathering a challenging few months, also marked by staff lay-offs and a public spat between Mr Musk and US financial regulators.

Shares of Tesla, which are down 22 per cent this year, were about flat after the results.

Mr Musk is still battling to convince investors that demand for the Model 3, the sedan hoped to propel Tesla to sustainable profit, is "insanely" high, and that it can be delivered efficiently and swiftly to customers around the world.

Lower deliveries had added to worries over Tesla's cash situation and increased speculation a capital raise was coming soon.

On a call following results, Mr Musk also stepped back from an earlier prediction that the company's Shanghai factory, which is currently being built, would likely produce 3,000 Model 3s per week by year's end. Instead, the so-called Gigafactory would build 1,000, or maybe 2,000 per week by the end of the year, he revealed.

Many analysts had predicted the company would need to raise funds for its expansion, including the Shanghai factory, the upcoming Model Y SUV, and other projects.

Tesla said it ended its Q1 with US$2.2 billion in cash after paying off a US$920 million convertible bond obligation in March.

"There is some merit to raising capital," responded Mr Musk, after being asked why he had not done so yet. "It's probably about the right time."

The company stood by its 2019 delivery forecast of 360,000 to 400,000 vehicles and said it may produce as many as 500,000 vehicles if its China factory reaches volume production in the fourth quarter.

Tesla said a loss in its second quarter would be "significantly" less than the US$702 million lost in Q1. Profit would return in Q3, Tesla said.

Haris Anwar, senior analyst a financial markets platform Investing.com, called guidance for Q2 "bleak". "I continue to see a very volatile 2019 for Tesla and its shares," Mr Anwar said.

Tesla's results came two days after the company hosted a self-driving event, in which Mr Musk predicted Tesla would have over a million autonomous vehicles by next year.

Some analysts perceived the presentation as a way to deflect attention from questions about demand, margin pressure, increasing competition and even Mr Musk's ongoing battle with US regulators. On Thursday, Mr Musk and the US Securities and Exchange Commission were expected to tell a federal judge the status of discussions to resolve their dispute over the former's Twitter use.

Heightening uncertainty during the quarter were logistics bottlenecks at international ports, price adjustments on vehicles and a surprise announcement, later reversed, to close most of Tesla's stores in order to financially offset the introduction of the US$35,000 Model 3.

On Wednesday, Tesla said it planned to deliver 90,000 to 100,000 vehicles to customers in Q2, versus 63,000 vehicles in Q1.

Tesla reported net loss attributable to common shareholders of US$702.1 million, or US$4.10 per share, in Q1 ended March 31, compared with a loss of US$709.6 million, or US$4.19 per share, a year earlier. REUTERS