Recently, Tesla held its quarterly earnings meeting, which resulted in the company’s decision to delay production of the much-anticipated Tesla Class 8 semi-electric truck. Trucks were originally projected for commercial use in April 2019; however, production is now set to start in early 2020.
Tesla’s CEO, Elon Musk, was prepared for the first-quarter loss to his company. But even analysts were shocked by the size of the company’s financial hit: a whopping $702.1 million. Tesla Class 8 sales plummeted by 31%, but Musk remains certain that demand and profit margins will only increase from now on.
In line with these projections, demand for the Tesla S, X, and 3 models have returned to normal after the company delivered a mere 63,000 vehicles in the first quarter. Despite the uptick in demand, Musk predicts second-quarter profits will report a further loss to the company; however, profit trends are expected to return to normal by the third quarter.
Tesla Class 8 was expected to deliver twice the amount of semi-truck vehicles ordered by March 31. The company cited “unforeseen challenges” as the reasoning behind its failure to deliver on their promise. With a new Chinese factory now in action, semi-electric truck production is set to be back on track for the newly set 2020 date. Additionally, if the Chinese factory meets production expectations, overall vehicle production could hit the 500,000 mark — 100,000 more than the company’s 400,000 target.
The electric vehicle Tesla Class 8 innovators released plans for the semi-electric truck in 2017, offering $20,000 pre-orders for their base model. The semi-trucks feature a 300-mile battery range and are valued at $150,000; the extended-range model is priced at $180,000 with a 500-mile battery range. Among the first companies to pre-order the electric semis were FedEx, Pepsi Co., Albertsons, Anheuser-Busch, J.B. Hunt, and Walmart.
As fleet managers wait with bated breath to get their chance to add electric semi-trucks to their commercial operations, Tesla will need to work harder to not only hit their target production, but also support their business. Gartner analyst Michael Ramsey noted that the company is reaching its “cash floor,” or the bare minimum it needs to pay the bills. If it continues on this downward spiral, it could be set to close its doors within six months’ time.
However, Ramsey also states that this worst case scenario most likely won’t happen. If the company sticks to its projected production for the quarters ahead, they’ll be able to solve their first- and second-quarter profit concerns without issue.
For now, fleets can look forward to ordering the electric semi-trucks once production begins in early 2020.