Musk Tells Tesla Shareholders Consumer Demand Not a Problem




 

(Bloomberg) -- Tesla Inc. Chief Executive Officer Elon Musk dismissed concerns about demand for his company's trademark electric vehicles, telling shareholders on Tuesday that sales this quarter could hit record levels.

Tesla has said it expects to deliver 90,000 to 100,000 cars in the second quarter, but questions of demand have lingered after a disappointing first quarter with deliveries of just 63,000 vehicles. That has helped depress shares about 35% so far this year. But Musk struck an optimistic tone, saying the company's sales have "far exceeded" its production volumes.

"I want to be clear: there is not a demand problem," the CEO said at Tesla's shareholder meeting at the Computer History Museum in Mountain View, California. "We have a decent shot at a record quarter on every level. If not, it will be very close."

Musk's remarks were welcomed by investors, who bid up Tesla shares as high as 5.3% in after-market trading. That came on top of a nearly 2% gain to $217.10 in New York trading prior to the start of the annual meeting.

Wall Street analyst reaction was tempered by continued concern about sales of the automaker's Model 3 sedan. "Musk and Tesla provided investors with more useful information than we expected heading into this event, yet this clearly remains a prove me story in the near-to-medium term," Wedbush Securities analyst Daniel Ives said in a research note after the meeting. "We need to see improving Model 3 demand globally this quarter coupled with profitability" in the second half of the year, the note said.

Tesla expects to grow its fleet of vehicles by 60-80% this year, Musk said after doubling it last year. But he added that fast-paced expansion makes it harder for the company to stay in the black. "It's hard to be profitable with that level of growth," Musk said. "We could slow it down, but then that would not be good for sustainability and the cause of electric vehicles."

Musk said Tesla expects to begin volume production of the Model Y SUV toward the end of next year, targeting "a car factory on each continent." He said that equipment, including stamping machines, a paint shop, and battery module lines, are being installed at the company's "gigafactory" in Shanghai but did not announce who the battery supplier is. The company is actively searching for a European plant site and hopes to make a decision on location by year-end, Musk said.

As part of his quest to collapse the battery supply chain, he mused about the possibility of delving into raw material production. "We might get into the mining business, I don't know," he said. "We'll do whatever we can to make sure we can scale as fast as possible."

Robyn Denholm, Tesla's recently appointed chairman, spoke to investors as the meeting got underway and thanked them for their "intestinal fortitude." Tesla's board of directors, including Oracle founder Larry Ellison, sat in the front row. Many of the questions from shareholders in attendance focused on what they perceived to be routinely negative media coverage of Tesla.

Musk said he was unsure what to do about "the most crazy disinformation campaign I've ever seen," saying he was reluctant to use paid advertising. He specifically called out Bloomberg News for what he termed "quite a few negative stories." Musk urged shareholders to help counter that media narrative by sharing their positive outlook through word-of-mouth endorsements.

The CEO appeared relaxed and ebullient at the meeting, joking that the wildly popular "Fart Mode" feature -- which makes Tesla cars emit an audible sound effect on demand -- is "perhaps my finest work." He also repeated a pledge to have 1 million cars capable of full self-driving on the roads next year, but underscored the company would still need regulatory approval.

Of eight proposals offered at the meeting, the company said six passed. Proposal 4, which would have eliminated super-majority voting requirements, and Proposal 5, which was designed to reduce director terms from three years to two years, were supported by the board but failed to reach the two-thirds threshold required. The results of the votes will be formally announced in an 8-K to be filed within four business days.

(Updates with analyst reaction in fifth paragraph)

To contact the reporter on this story: Dana Hull in San Francisco at dhull12@bloomberg.net

To contact the editors responsible for this story: Kevin Miller at kmiller@bloomberg.net, Chester Dawson, Jeff Sutherland

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.

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