Tesla’s losses deepen as expansion costs grow

Tesla reported a loss of $293 million, or $2.09 per share.

Although gross margins will widen by 2-3 percentage points in the second half of the year, adjusted operating expenses will increase for the full year by 30 per cent, Tesla said. Deliveries were shy of the company’s expectations for 17,000 deliveries as Model X production was slowed by supplier shortages.

It’s been a busy quarter for Tesla too. The automaker said construction on the facility is still on target to support volume production of the Model 3 in late 2017.

This probably won’t come as a surprise to anyone, but Tesla has confirmed that the last vehicle of its “Model” lineup, the Tesla Model Y compact crossover, will be the company’s next biggest priority after settling the Model 3.

Tesla Motors will add a new retail store every four days, on average, during the next year, according to the company’s second-quarter earnings report Wednesday.

The company’s losses ballooned to $150 million in the quarter ending in June, more than twice what Wall Street had expected. The company blamed “steep production ramp, which resulted in nearly half of Q2 production occurring in the final four weeks of the quarter” for lower-than-expected deliveries (read: It’s All About Production: Tesla ETFs to Ride on Q1 Results). Shares fell 0.6 per cent in after-hours trade after closing down 0.6 per cent at US$225.79 on the Nasdaq. CFO Jason Wheeler also suggests build quality has improved ‘quite dramatically, ‘ especially for the Model X.

New vehicles orders rose by 67% compared to the same time a year ago.

This process is currently underway with the Model 3, which was revealed as a functioning prototype earlier in 2016, but is now taking up huge resources as Tesla builds a production line capable of churning out the £35,000 auto at a faster rate than anything it has built before.

Musk also proposed combining the solar panel company SolarCity, a firm that he also chairs, with Tesla to double down on renewable energy generation. In June, the government announced it would investigate Tesla’s semi-autonomous Autopilot system after a driver using the system died in a Florida crash. This week, the companies agreed to a $2.6 billion merger. The company is also intending to repay in the third quarter the principle on $411 million of 2018 convertible notes.

Now, none of this is to say that Tesla won’t find more funding.

The loss, excluding some items, was $1.06 a share, the company said in a letter to investors posted on its website Wednesday.