Tesla Earnings: Analysts Expect a Loss Despite Sales Surge

Tesla surprised many analysts and investors earlier this month when it said it delivered a record 95,200 cars in the second quarter, a roughly 50 percent increase from the first three months of the year. The news lifted its sagging stock price as well as the spirits of its customers and many fans.

On Wednesday afternoon, the company will reveal whether that surge in sales also lifted its bottom line when it reports earnings for the second quarter.

Tesla previously has said it expected to post a loss for the second quarter after losing $702 million in the first, when sales slumped as the company struggled with logistical challenges, including getting thousands of its Model 3 sedan to Europe and China.

Typically, a big jump in deliveries means a carmaker is doing well and minting money. But that may not necessarily be the case for Tesla because it is spending heavily. The company is building a plant in China, developing several vehicles and making improvements to its customer service.

Its record sales in the second quarter came at a cost: Tesla pumped up demand in part by cutting prices. The most recent cut was last week, when it lowered the price of the most affordable version of its Model 3 sedan by $1,000, to $38,990.

It’s unclear how much money, if any, Tesla makes on the lower-priced versions of the Model 3. All told, the sedan made up more than 80 percent of the company’s deliveries in the second quarter.

A big problem for the company is that demand for its pricier and more profitable Model S luxury sedan and Model X sport utility vehicle has fallen sharply this year.

In the second quarter, combined sales of the Model S and X totaled 17,650 vehicles. That was about 5,500 more than in the first quarter but 10,000 fewer than it sold in the last three months of 2018.

“It is obvious the appetite for the Model S and X is not that strong,” said Shane Marcum, general manager of the Cross-Sell Reports, which tracks registrations of new cars in 23 states. “The Model 3 is cannibalizing sales of the S and X.”

Auto analysts and car enthusiasts have also been speculating that Tesla might soon redesign the Model S and X, which were first introduced several years ago. But the company’s chief executive, Elon Musk, said on Twitter that was not the case, and Tesla was planning “only a series of minor ongoing changes.”

Tesla is hoping that demand for its electric cars will continue to grow in the second half of the year. The company has set a goal of selling more than 360,000 cars in 2019. Sales in the first six months of the year put it less than halfway to that total, and it will have to sell 100,000 or more cars in each of the final two quarters to hit the target.

The company could find that difficult. On July 1, the federal tax credit available to Tesla’s customers in the United States will fall by half to $1,875. On Jan. 1, the tax credit will go away entirely.

For this year at least, Tesla can’t count on any new models to attract customers and drive sales higher. It is working on the Model Y, a sport utility vehicle that shares a lot of parts with the Model 3 but will come with up to three rows of seating, rather than the Model 3’s two rows.

But that car won’t go into production until late in 2020. Tesla is also working on a pickup truck and a semi truck, but they are not expected to arrive until after the Model Y.

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