Tesla follows Musk warning with smaller profit than prior quarter

Elon Musk argues that Christensen has it backwards when it comes to disruption in the tech sector

Elon Musk argues that Christensen has it backwards when it comes to disruption in the tech sector

Tesla was able to sell almost 140,000 Model 3s previous year - and it hopes to make 7,000 of the sedans per week by the end of 2019. In a strong economy, that demand would be 700,000 to 800,000 units of the Model 3 and as production increases it will bring down the price.

Total revenues rose to $7.23 billion in the fourth quarter, beating expectations, but earnings per share fell short at $1.93.

While the company expressed optimism that it could post a profit in the first quarter despite fewer deliveries of its flagship S and X vehicles, Tesla warned of challenges such as logistics and global deliveries of its new Model 3. In terms of revenue, the company beat expectations, reporting $7.23 billion in the fourth quarter, compared with estimates of $7.08 billion.

Profit jumped to $139.58 million after a loss of $675.35 million in the same period of 2017, which helped to lower the total loss for a year ago to $976 million, financial results showed.

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Shares of Tesla fell 2% in after-hours trading. Musk gave a "rough guess" that Tesla would begin building its originally promised $35,000 version around the middle of this year.

But the company's irascible founder Elon Musk remained upbeat, telling investors 2018 was its "most successful" year as well as its most challenging. But with the new 100kWh models, the lowest-price Model S vehicles start at $85,000, while the lowest-price Model X will cost at least $88,000, with the option to pay an additional $8,000 to add about 8% more driving range.

The company said it plans to produce its Model 3 "at maximum production rates" this year.

The Palo Alto, California-based company has struggled to find a pricing mix that is both accessible to consumers and profitable for the company as it tries to ramp up deliveries. Total deliveries for the quarter were 90,700, also falling short of some estimates on Wall Street.

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Bullish Tesla analyst Colin Rusch of Oppenheimer told clients Monday that "Model 3 demand, production, and margin" will be the primary drivers of the stock this year.

Earlier this month, Tesla CEO Elon Musk sent a letter to employees announcing the company was slashing its full-time staff by about 7%, or approximately 3,000 positions. Tesla recognises revenue once a vehicle is delivered.

Tesla is set to report its fourth-quarter results Wednesday afternoon, almost two weeks after warning that the pressure to achieve a profit and make the Model 3 more affordable led to more than 3,000 job cuts. Tesla's staff had increased by 30% in 2018, which Musk said was more than the company could support as it seeks to reduce costs.

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