Strong sales of the vehicle are key to generating cash to pay operating expenses, fund capital spending and make upcoming debt payments. But it has had trouble getting them out the door to several hundred thousand people who put down $1,000 deposits to order one.
But in a letter to shareholders Tesla is still bullish and calculates that if it can bring Model 3 production volume to 5,000 units per week and can grow gross margin to break-even in Q3 and Q4.
Musk said existing Tesla plants are "jammed to the gills", so a new factory will produce the automaker's first mass-market-priced SUV, the Model Y, and include a battery plant that will lure thousands of new jobs.
The call came after Tesla forecast a reduction of capital expenses for the year and affirmed that it will turn a profit in the second half of the year. While Tesla's battery module line was the main issue plaguing output for months, that's been resolved, according to the company.
Tesla had $2.67 billion in cash on hand at the end of the first quarter, down from the $3.37 billion at the end of past year. Companies have spent almost $3.3 billion.
Musk cut off analysts' queries about the company's capital requirements and whether it was retaining Model 3 reservation holders, calling the questions "so dry" and "not cool". Analysts had a consensus revenue estimate of USD3.22 billion. During the Q&A session, Musk teased that Tesla will begin investing in the Model Y sometime later this year. At the end of a year ago the company had a total of $9.5 billion in long-term debt.
To achieve profitability, Musk will have to reverse what today amounts to a $22,584 (roughly Rs. 15 lakhs) pre-tax loss per vehicle built by the Silicon Valley company.
The Moody's ratings agency early last month downgraded the company's credit further into junk status, saying Tesla might run out of cash if it did not raise more than $2 billion.
The Model 3 starts at $35,000 but can easily top $50,000 with options. Tesla said it produced 4,750 Model 3 cars during the two weeks prior to its scheduled downtime in April. Musk acknowledged Tesla's aggressive automation efforts in the Gigafactory and in Fremont have led to costly mistakes and delays.
In Q2 2018, Tesla will shut down production for about 10 days as it tries to address bottlenecks across its production lines to increase production.
Tesla did not break out a cash flow calculation that it had included in previous quarters.
At first, the news didn't appear to hit investor confidence, as Tesla's stock increased by 1% in the hour following Tesla's announcement.
The continued struggle to ramp up production comes as Tesla is facing a federal investigation into a recent fatal crash involving Autopilot, its driver assistance system, and the voluntary recall of 123,000 Model S sedans announced last week.