Musk tells Tesla shareholders consumer demand not a problem

Tesla chief executive Elon Musk dismissed concerns about demand for his company’s trademark electric vehicles, telling shareholders at the company’s annual meeting Tuesday that sales this quarter could hit record levels. Tesla has said it expects to deliver 90,000 to 100,000 cars in the second quarter, but questions of demand have lingered after a disappointing first quarter with deliveries of just 63,000 vehicles. That has helped depress shares about 35 per cent so far this year. But Mr Musk struck an optimistic tone, saying the company’s sales have “far exceeded” its production volumes and that the bulk of new orders are coming from new customers who were not reservation holders. “I want to be clear: there is not a demand problem,” Mr Musk said on stage at the Computer History Museum in Mountain View, California. “We have a decent shot at a record quarter on every level. If not, it will be very close.” Mr Musk’s remarks were welcomed by investors, who continued to bid up Tesla in pre-market trading with shares gaining 2.5 per cent, after rising in New York Tuesday. The stock is down 35 per cent since the start of the year. Wall Street analyst reaction was tempered by continued concern about sales of the automaker’s Model 3 sedan. “Musk and Tesla provided investors with more useful information than we expected heading into this event, yet this clearly remains a prove me story in the near-to-medium term,” Wedbush Securities analyst Daniel Ives said in a research note after the meeting. “We need to see improving Model 3 demand globally this quarter coupled with profitability” in the second half of the year, the note said. Tesla expects to grow its fleet of vehicles by 60-80 per cent this year, Mr Musk said after doubling it last year. But he added that fast-paced expansion makes it harder for the company to stay in the black. “It’s hard to be profitable with that level of growth,” Mr Musk said. “We could slow it down, but then that would not be good for sustainability and the cause of electric vehicles.” Mr Musk said Tesla expects to begin volume production of the Model Y SUV toward the end of next year, targeting “a car factory on each continent.” He said that equipment, including stamping machines, a paint shop and battery module lines, are being installed at the company’s “gigafactory” in Shanghai, but did not announce who the battery supplier is. The company is actively searching for a European plant site and hopes to make a decision on location by year-end, Mr Musk said. As part of his quest to collapse the battery supply chain, he mused about the possibility of delving into raw-material production. “We might get into the mining business, I don’t know,” he said. “We’ll do whatever we can to make sure we can scale as fast as possible.” Robyn Denholm, Tesla’s recently appointed chairman, spoke to investors as the meeting got under way and thanked them for their “intestinal fortitude”. Tesla’s board of directors, including Oracle founder Larry Ellison, sat in the front row. J.B. Straubel, Tesla’s chief technology officer, and Drew Baglino, Tesla’s vice president of technology, joined Mr Musk on stage. Mr Musk appeared relaxed and ebullient at the meeting, joking that the wildly popular “Fart Mode” feature - in which the car emits audible sound effects that can be programmed for specific seats - is “perhaps my finest work.” He also repeated a pledge to have 1 million cars capable of full self-driving on the roads next year, but used more conservative language and stressed that the company would still need regulatory approval. “Musk was calm, confident, and articulate in a way that we haven’t seen in his last several public appearances,” wrote Gene Munster of Loup Ventures in a note. “In the past, when Tesla has been struggling, Musk has been visibly troubled himself, and we didn’t see that today.”