Tesla Inc CEO Elon Musk on Wednesday called sweeping US stay-at-home restrictions to curtail the coronavirus outbreak ‘fascist’ as the electric carmaker posted its third quarterly profit in a row.
Shares of the company were up more than 9% at $873 in extended trade and Tesla’s report of a profitable quarter came just a day after Detroit-based rival Ford Motor Co reported a $2 billion first-quarter loss and forecast losing another $5 billion in the current quarter.
But one of the biggest disruptions to Tesla has been the government-ordered shutdown of its factory in Fremont, California March 24.
Alameda County, where the factory is based, on Wednesday extended stay-at-home orders until May 31 and vehicle manufacturing is not considered an essential business that is exempt.
‘To say that they cannot leave their house and they will be arrested if they do, this is fascist,’ Musk said on an earning calls Wednesday
Musk and his girlfriend, singer Grimes, are pictured at the MET Gala in New York on May 7, 2018
Shares of the company were up more than 9% at $873 in extended trade on Wednesday
On a conference call on Wednesday, Musk said he did not know when they could resume production.
‘I think the people are going to be very angry about this and are very angry,’ Musk said as he went off track in the call about earnings. ‘It’s like somebody should be, if somebody wants to stay in the house that’s great, they should be allowed to stay in the house and they should not be compelled to leave.
‘To say that they cannot leave their house and they will be arrested if they do, this is fascist. This is not democratic, this is not freedom. Give people back their goddamn freedom!’
The strictest stay-at-home orders recommend that people only leave their homes for essential trips such as visiting the grocery store or pharmacy.
Tesla shut down the California factory just as it was ramping up production of its new electric crossover utility vehicle Model Y, which it expects to generate record demand and higher profit margins.
Tesla on Wednesday said the Model Y was already contributing profits, marking the first time in the company’s history that a new vehicle is profitable in its first quarter.
Earlier this month, Tesla said production and deliveries of its Model Y sports utility vehicle were significantly ahead of schedule, as it delivered the highest number of vehicles in any first quarter to date, despite the outbreak.
Tesla reported that it eked out a first-quarter net profit Wednesday. The electric car and solar panel company said it made $16 million from January through March, its third-straight profitable quarter.
Excluding items, Tesla posted a profit of $1.24 per share. Analysts had expected a loss of 36 cents per share.
Tesla shares are also up 91% for the year to date as of Wednesday’s close, after recovering from a sharp slump in March.
The Tesla founder quipped that it’s ‘not why people came to America or built this country, excuse me’
Alameda County, where the factory (pictured) is based, on Wednesday extended stay-at-home orders until May 31 and vehicle manufacturing is not considered essential
Tesla on Wednesday said the Model Y (pictured) was already contributing profits, marking the first time in the company’s history that a new vehicle is profitable in its first quarter
But Musk called the state stay-at-home order a ‘serious risk’ to the business.
‘So the expansion of the shelter in place or as frankly I would call it, forcibly imprisoning people in their homes, against all their constitutional rights, is my opinion, and breaking people’s freedoms in ways that are horrible and wrong, and not why people came to America or built this country, excuse me,’ Musk added later.
‘It’s an outrage. It will cause loss, great, great harm, but not just to Tesla, but any company. And while Tesla will weather the storm there are many small companies that will not.’
Tesla produces a fraction of the cars of its rivals but has a much larger stock market value on expectations of tremendous growth.
Musk said that while other carmakers were cutting back, Telsa was ramping up investment. He said Tesla might announce the location of a new US factory in one to three months.
Tesla said it could not predict how quickly vehicle manufacturing and global supply chains will normalize, saying it would revisit full-year guidance for net income and cash flow when it reports current-quarter results in three months.
Tesla in January said it expected positive quarterly cash flow and positive net income going forward. The company on Wednesday did not update its previous forecast of delivering half a million vehicles by the end of 2020.
Tesla said its free cash flow had been impacted by growing inventory due to coronavirus shutdowns.
The COVID-19 pandemic has disrupted demand for cars, with automakers including Tesla forced to furlough workers and close factories.
Vehicle demand in the United States has dropped as much as 80% in some hard-hit areas in March, but some analysts said sales appeared to recover slightly in the first two weeks of April.
The electric carmaker did not say when it planned to resume production at its Fremont plant.
Musk tweeted later on Wednesday that ‘hospitals in California have been half empty this whole time’
Musk replied to Kimbal Musk who said Colorado ‘is doing well’ and ‘our governor has ended the stay at home order’
But Tesla on Wednesday said it expected production at its vehicle factories in Fremont, California and in Shanghai, China to ramp gradually through the second quarter.
The company said operations at its Shanghai plant were progressing better than expected, with production rates of its Model 3 sedan expected to hit 4,000 units per week, or 200,000 per year, by mid-2020. It delivered 88,400 vehicles during the first three months of the year, a 40% increase from a year ago. That was aided by production at its new factory in Shanghai.
It said gross margins at its Shanghai factory were approaching those of Model 3 production in the United States. Automotive gross margins in the first quarter jumped to 25.5% overall.
But of the $5.1 billion in overall automotive revenue, nearly 7% were due to regulatory credits – money Tesla receives from other automakers that buy the company’s carbon emissions credits to meet stricter regulation. Revenue from those credits nearly tripled from the last quarter.
Hargreaves Lansdown analyst Nicholas Hyett also flagged that Tesla’s free cash flow was negative last quarter and improved only modestly on a yearly basis.
‘The immediate future doesn’t look like the ideal time to be selling premium priced cars, so perhaps it’s no surprise guidance has been paused,’ Hyett said.
On Wednesday, Musk tweeted his opposition to California shuts downs as he complained: ‘Hospitals in California have been half empty this whole time.’
He also retweeted his brother Kimbal Musk who said Colorado ‘is doing well’ and tweeted that the governor ‘has ended the stay at home order’.
‘Bravo!’ Elon Musk tweeted at Governor Jared Polis.
Musk tweeted on March 6 that ‘the coronavirus panic is dumb’ but later offered to supply hospitals with free ventilators.
Alongside a link to a Wall Street Journal op-ed about whether lockdowns are saving lives, Musk tweeted: ‘Give people their freedom back!’
Musk also tweeted a link to a local news story about Texas lifting some restrictions this week, saying: ‘Bravo Texas’
Musk had earlier hit out at Silicon Valley, saying it had become ‘Sanctimonious Valley’ and ‘too much the moral arbiter of the world’
Then on Tuesday, Musk and a host of critics slammed YouTube for removing a video of two doctors suggesting COVID-19 death tolls are being boosted and urging an end to lockdowns because they do more harm than good.
Musk had previously shared the clip and stated: ‘The docs make good points.’
YouTube took down the video of news conference featuring Drs. Dan Erickson and Artin Massihi, who run a private urgent-care clinic in Bakersfield, California, on Monday because they claim it violated their user policy by disputing health officials.
‘FREE AMERICA NOW,’ the 48-year-old tweeted.
Alongside a link to a Wall Street Journal op-ed about whether lockdowns are saving lives, Musk also tweeted: ‘Give people their freedom back!’
He tweeted a link to a story about Texas lifting some restrictions this week, saying: ‘Bravo Texas’.
Musk later clarified, in response to a tweet from one of his followers, that he believed states should be reopening slowly.
‘Yes, reopen with care & appropriate protection, but don’t everyone under de facto house arrest,’ he tweeted.
Musk had earlier hit out at Silicon Valley, saying it had become ‘Sanctimonious Valley’ and ‘too much the moral arbiter of the world’.
Musk’s Twitter outburst came just as he was on the cusp of getting a payout from a bonus scheme that is linked to the electric car-maker’s share price.
Having already reached the first set of goals for revenue and adjusted earnings, Tesla now only needs to average a market value of $100 billion during a six-month period to trigger Musk’s option on 1.69 million shares and build up upon a fortune already estimated at $40 billion by Forbes.
Those options are currently worth about $890 million, based on their exercise price and Tesla’s stock price of $871 in Wednesday extended trading.
If the stock trades on the same trajectory Thursday, Tesla’s market value will have averaged about $99 billion over the past six months, based on Associated Press calculations drawn from data provided by FactSet.
Tesla shares are also up 91% for the year to date as of Wednesday’s close, after recovering from a sharp slump in March