NEW YORK - Tesla is settling into the first circle of “production hell.” That was Chief Executive Elon Musk’s 2017 description of the difficulties the $45 billion electric-car maker was experiencing as it started to mass-produce the Model 3 sedan. While some of the worst of that has abated, the problem is taking a wider hold.

Tesla lost money again in the first quarter after vehicle sales fell by almost a third from last year’s fourth quarter. Revenue for the most recent period plummeted 37 percent to $4.5 billion from the previous three months, the company revealed on Wednesday, driving the company into a $702 million puddle of red ink.

Perhaps it’s a blip. Overseas buyers may help sales perk up – the company started shipping Model 3s to China and Europe this year. Musk said he now expects a return to profit in the third quarter. But there are other concerns, too.

First, Tesla’s U.S. Gigafactory is not cranking out as many batteries as expected. Supply may struggle to match demand if the latter does pick up.

Musk is also still setting bumper targets. He predicted on Monday that more than 1 million Teslas capable of autonomous driving would be on the roads within 15 months. That requires selling an average of almost 9,000 vehicles a week, Breakingviews calculates, some 25 percent more than in the company’s record fourth quarter. And he says that production of both the Model Y - a cheap SUV - and the Semi truck will start next year.

On top of that, Musk seems to be changing tactics on the fly. This year alone he has decided to close most Tesla stores, then reverse course; bumped car prices up and down more than once; and started selling the bottom-of-the-range $35,000 Model 3 online before relegating purchases to in-store only. All the while he is trying to cut costs, partly to avoid raising new capital – although having previously forsworn that, Musk said on Wednesday the time might be right to do it.

Meanwhile the CEO is running short of cash. Tesla ended March with $2.2 billion, $1.5 billion less than at the end of 2018 despite unusually scanty capex of just $280 million. Musk has scraped through such torment before, but one way or another the limbo can’t last.

CONTEXT NEWS

- Tesla reported a first-quarter loss of $702 million after U.S. stock markets closed on April 24. Revenue of $4.5 billion was 37 percent lower than last year’s fourth quarter. The mean estimate of sell-side analysts, according to data from Refinitiv, pointed to the electric-car maker losing $119 million on $5.2 billion of revenue.

- On April 22 Chief Executive Elon Musk outlined his plan to have 1 million autonomous-capable Tesla vehicles on the roads by the middle of next year. He also predicted the company will be producing 10,000 cars a week by the end of 2019 and will in 2020 add both the Model Y and the Semi truck to its line-up.

(Editing by Richard Beales and Martin Langfield)

© Reuters News 2019