Tesla burnt $ 1 billion in Q1 and Musk finds analysts' questions 'boring'

On the conference call, Musk said Tesla is poised to surpass all rivals in manufacturing

The earnings report started optimistically enough, with Elon Musk forecasting an end to Tesla Inc.’s cash-burning days after blazing through another $1 billion last quarter.

But by the end of Tesla’s first-quarter conference call, Musk was berating analysts for asking “boring” questions, the shares had plunged and any shred of predictability was out the window.

Musk, 46, has built up a showman’s reputation as the founder and chief executive officer of Tesla, calling on true believers to help him overcome the “haters” who question his company’s ability to usher in an electric-vehicle age on an ambitious timetable. His performance Wednesday revealed his willingness to bite the hand that feeds, ridiculing representatives of Wall Street’s biggest banks who tried to pinpoint how he’d live up to his promises to build more Model 3 sedans and generate cash in the second half of the year.

“The boring questions can also be categorized as the tough ones,” said Dave Sullivan, an analyst at AutoPacific Inc. “I hope the Tesla fans know how to swim, because without the answers to the tough questions, it looks like Musk is leading them straight into the water.”

The often-colourful Musk unveiled what he portrayed as Tesla’s first mass-market car more than two years ago but has pushed back Model 3 manufacturing targets several times. Slow output has limited the amount of money coming in from customers taking delivery and tested Tesla’s balance sheet.

Prospective patrons have showed patience -- there are still more than 450,000 reservation holders waiting, and customer deposits keep rising, approaching almost $1 billion as of March 31.

Putting Down More Money

When Joe Spak, an RBC Capital Markets analyst who rates Tesla the equivalent of a hold, asked Musk how many Model 3 reservation holders were actually taking the step to configure their car when invited to do so, a pause followed.

“We’re going to YouTube,” Musk said, referring to the owner of a channel on the video-streaming service who had lobbied the CEO ahead of time for the chance to ask questions on behalf of retail investors.

“Sorry,” Musk said, “these questions are so dry. They’re killing me.”

Tesla’s balance sheet also was a sore subject for Musk. While Tesla expressed confidence about the second half of the year, negative free cash flow was more than $1 billion for the third time in the last four quarters. The result was also worse than analysts’ average estimate for cash burn of about $978 million.

Tesla's Cash Flow

Tesla had $2.67 billion in cash on hand at the end of the first quarter, down from the $3.37 billion at the end of last year. Toni Sacconaghi of Sanford C. Bernstein, who rates the company the equivalent of a hold, bore the brunt of Musk’s sharpest words after asking about capital requirements.

“Excuse me. Next. Next,” Musk said to the call operator. “Boring, bonehead questions are not cool. Next?”

Manufacturing Reset

Model 3 production probably will pause for about 10 days this quarter, an estimated duration that includes a shutdown last month to address bottlenecks. While Tesla’s battery module line was the main issue plaguing output for months, that’s been resolved, according to the company. Musk now expects to be able to make 5,000 cars’ worth a week before installing an automation system from its German manufacturing unit Grohmann.

On the call, Musk said Tesla is poised to surpass all rivals in manufacturing.

“A really great production system is primarily a software problem, and there’s no one in the auto industry that is remotely as good as Tesla at software,” he said. “Tesla is way better at software than any other car company.”