Musk says never mind the hiccups, Tesla is on track

By Jad Mouawad, New York Times News Service

Wednesday, Nov. 4, 2015 | 2 a.m.

Tesla Motors on Tuesday sought to reassure investors and its devoted fans that it was still on track to produce more than 50,000 cars this year, though the electric-car company hinted at some production issues with its new Model X sport utility vehicle.

Tesla’s shine has been wearing slightly in recent months. The company’s stock price has fallen more than 25 percent from a summertime high of $280 a share. Consumer Reports dropped its recommendation of the Model S sedan because owners complained about quality issues. And Tesla has come under greater scrutiny about its production targets with the Model X, which was delayed two years, as well as the pace of its investments.

But Elon Musk, the company’s chairman and chief executive, said issues with the Model X were minor. Tesla began shipping the Model X, its second car, in September in the hope it would attract more buyers to the electric-car market.

Musk said it was on track to produce several hundred Model X vehicles a week before the end of this year.

“The main thing for the X is scaling of production,” Musk said during a conference call about the company’s third-quarter earnings. “We are making steady progress every day of the week. We see no fundamental issues on the production ramp; it’s just a question of how quickly we can solve each issue.”

Tesla also said it produced more cars in the third quarter than it had planned and would very likely deliver 50,000 to 52,000 cars this year. In the last quarter, Tesla had downgraded those targets to between 50,000 and 55,000, down from 55,000, mostly because of the production issues with the Model X and its suppliers.

The company said global orders for the Model S had increased by more than 50 percent from the same time last year, with faster growth in North America.

The net loss for the quarter that ended Sept. 30 widened to $229.9 million, or $1.78 a share, from $74.7 million, or 60 cents a share, a year earlier. Total revenue rose 10 percent to $936.8 million.

Shares were up more than 10 percent in extended trading, after closing 2.5 percent lower.

Tesla is building its massive $5 billion factory near Reno and expects to start making batteries next year.

The Model X was delayed in part because of complex design choices, including winglike doors that required substantial engineering to fine-tune, and a second row of seats that has slowed down output.

To make up for problems with suppliers of the Model X’s second-row seats, for instance, Tesla said Tuesday it had started building the seats itself.

“These factors add uncertainty to our build plans during Q4, but we feel emphasizing quality is the right decision for our customers,” the company said.

Tesla expects combined production of both Model S and Model X cars to be between 1,600 and 1,800 a week in 2016.

Musk once more toyed with analysts on the conference call about whether the company had any plans to compete in the ride-sharing market with its own autonomous on-demand cars. After Musk declined to comment, one analyst said, “I’ve never heard you punt” on long-term strategic questions.

Musk said: “There is a right time to make announcements, and this is not the right time, nor is our strategy fully baked right now. We would prefer to announce something when we think we have the full story understood.”

Adam Jonas, the Morgan Stanley analyst who asked the question, in August doubled his price target for Tesla shares based on his belief that the company would introduce a service he called “Tesla Mobility,” which he defined as an app-based, on-demand mobility service that would compete with Uber and similar services being considered by Google and Apple.

Tesla recently introduced a feature called Autopilot on its cars that can steer and change lanes on the highway. It has gotten mixed reviews.

After some users uploaded videos of cars behaving erratically on Autopilot, Musk said Tesla would also introduce “additional constraints” related to when the feature can be enabled in order to “minimize the possibility of people doing crazy things with it.”

He said that the company had always presented the feature as a “beta release” and that it would learn from experience and get more refined over time.

Reflecting his flair for pungent analysis, Musk underlined his conviction that the auto market was moving toward full autonomy in the next two decades.

“Any car that doesn’t have full autonomy will have negative value,” Musk said. “It will be like owning a horse. You will own it only for sentimental reasons.”