Tesla shareholders reject bid to strip Elon Musk of his chairman role

Elon Musk appeared emotional at Tesla’s annual shareholder meeting yesterday after he rebuffed an attempt by investors to strip him of his role as chairman.

Tesla’s shaky finances and inability to meet its production goals for its first mass-market sedan has caused frustration among investors.  

The proposal to remove Musk from his role as chairman of Tesla’s board was initiated by Jing Zhao, a shareholder who believes Musk may be ‘spread too thin’. 

Following the vote, Musk — whose voice appeared to quiver – said the company has experienced ‘the most excruciating hellish several months that we’ve ever had.’

‘But I think we’re getting there,’ he added.

He said that the company has largely overcome bottlenecks in production and it is ‘extremely likely’ Tesla will hit a weekly Model 3 production rate of 5,000 cars.

Elon Musk appeared emotional at Tesla’s annual investor meeting after he rebuffed a shareholder attempt to strip him of his role as chairman. Tesla’s shaky finances and inability to meet production goals for its first mass-market sedan has caused frustration among investors

All three directors seeking to remain on Tesla’s nine-member board were re-elected during the company’s annual meeting held Tuesday in Mountain View, California.

Directors Antonio Gracias, James Murdoch and Elon’s brother, Kimbal Musk, won by ‘a wide margin,’ according to Tesla. 

CtW Investment Group, an activist firm that represents labor union pension funds, had spearheaded a rebellion seeking to oust the trio from the board on the grounds that they didn’t know about the auto industry at a critical time in Tesla’s existence.

The company said a ‘supermajority’ of shareholders rejected a proposal to force Musk to step down as Tesla’s chairman, a position he has held since 2004 – four years before he also assumed the CEO job.

The precise voting totals will be disclosed within the next few days.

Elon Musk holds a 22 percent stake in Tesla, increasing the degree of difficulty for shareholders trying to challenge his authority.

Expansion in China

After the results were announced, Musk sought to reassure shareholders attending the meeting and others watching on a live webcast.

‘We build our cares with love,’ he said. 

He also noted how brutal the auto industry can be, especially to newcomers. ‘It’s insanely hard just staying alive.’

Musk said Tesla is planning to open a factory in China, to go with its plants in Fremont and the Netherlands.

Unlike its first US factories, Tesla’s new so-called ‘Dreadnought’ factories in China will both produce batteries and assemble the vehicles in one place, Elon Musk revealed.

Musk also told investors the Tesla Gigafactory in Nevada will soon produce more batteries than all other electric vehicle companies combined.

Model 3 customisation  

Tesla will expand the options available to Model 3 customers, Musk announced.

By the end of 2018, Musk hopes to start production of the $35,000 (£26,000) entry-level version of the Tesla Model 3.

This will be rear-wheel drive only and sport a smaller battery pack than other models in the range.

Musk told shareholders: ‘We will definitely offer a $35,000 version of the Model 3. And probably at the end of this year is when we will be able to make a smaller version of the battery pack, and get into volume production of $35,000 version in Q1 next year.

‘We would definitely honour that obligation, and we would do so right now if it were possible.’ 

Tesla will also begin production of a right-hand drive model of the Model 3 in 2019.

Musk did not reveal when customer deliveries of that model would begin. 

Musk said the company had been through 'the most excruciating hellish several months that we’ve ever had'. The firm has had various production issues with its highly anticipated Model 3 sedan (pictured)

Musk said the company had been through ‘the most excruciating hellish several months that we’ve ever had’. The firm has had various production issues with its highly anticipated Model 3 sedan (pictured)

Autopilot free trials

Tesla plans to offer a free trial of its self-driving autopilot feature to car owners who didn’t buy the feature initially.

Enhanced Autopilot costs an additional $5,000 (£3,700) in the current generation of Tesla models, or $6,000 (£4,400) after the customer has taken delivery of the car. 

Musk stayed tight-lipped about how long the free Autopilot trial would last. 

Autopilot is still under development, however, Musk has promised significant improvements in a new version of the self-driving software, which is scheduled to roll-out to drivers this month.

‘The reliability and capability of Autopilot will increase exponentially over the next six to twelve months,’ Musk predicted. ‘The improvements are very rapid.’

Musk also said he expected Tesla to post a quarterly profit during the July-September period. 

That’s something the Palo Alto, California, company has rarely pulled off in a 15-year history marked by steady losses while investing heavily in its technology and manufacturing plants.

Tesla has been burning through so much cash – more than $1 billion during the first three months of this year alone – that investors have been worrying it will have to sell more stock or add to its already hefty debt load to raise enough money to survive.

After conceding that ‘staying alive’ is difficult in the auto industry, Musk told shareholders that Tesla will be ‘cash flow positive’ during the second half of this year. 

WHAT IF TESLA MISSES ITS MODEL 3 PRODUCTION GOAL?

Tesla’s released its new Model 3 electric car in July 2017 with a batch of 30 vehicles sold exclusively to members of staff.

The affordable £25,000 ($35,000) five-seat vehicle travels 215 miles (346km) on a single charge and accelerates from zero to 60mph (0-100kmh) in under six seconds.

Although the eco-friendly car is one of Tesla’s more affordable models, those looking to buy the vehicle may be waiting months before they can get behind the wheel.

Tesla had struggled to meet the impressive demand for its vehicle, with a reported 500,000 pre-orders put in so far.

Tesla has repeatedly missed production goals for Model 3, meaning those who have put down a £712 ($1,000) deposit for one of the vehicles may still have to wait until the end of 2018 to get their hands on it.

Tesla missed its production goal for 2017’s third quarter, producing only 260 vehicles compared to an earlier estimate of 1,500.

As a result, the company’s shares fell 5.4 per cent in after hours trading on November 1.

Tesla said it delivered 26,150 vehicles total in the third quarter, a 4.5 per cent rise on the same period of 2016.

But the company added that ‘production bottlenecks’ had left it behind on its planned ramp-up for the Model 3.

In November 2017,  it said it hoped to achieve a production rate of 5,000 per month by the end of the first quarter of 2018, pushing back what was originally a target for the end of 2017.

In June 2018, Elon Musk said it is “extremely likely” Tesla will hit a weekly Model 3 production rate of 5,000 cars.

He added said the electric car maker will soon produce more batteries at its Nevada Gigafactory than all other electric vehicle companies combined, including those in China.

If Musk is correct, the prediction will translate into Tesla bringing in more cash than it’s spending in both the third and fourth quarters.

To do that, Tesla will probably have to meet Musk’s manufacturing goals for its Model 3, a sedan with a starting price tag of $35,000 that represents the company’s attempt to reach a mass market. 

Tesla still needs to more than double its recent production rate to reach Musk’s target of delivering 5,000 Model 3s per week.

Musk reiterated previous predictions that that will happen during the second half of this year.

WHAT WAS THE FINANCIAL SITUATION AT TESLA IN THE FIRST QUARTER OF 2018?

Tesla announced its financial situation as of the close of the first quarter of 2018 in a written statement released ahead of an earnings call held on Wednesday, May 2.

The firm reported a record loss of $709.6 million (£522m), or $4.19 (£3) per share, for the first quarter ended March 31, compared with a loss of $330.3 million (£243m), or $2.04 (£1.50) per share, a year earlier.

Excluding items, Tesla had a loss of $3.35 (£2.45) per share. Analysts had expected a loss of $3.58 (£2.63) per share.

The company said it ended the quarter with $3.2 billion (£2.3bn) in cash after spending $655.7 million (£483m) in quarterly capital expenses. 

Tesla’s capital expenditures declined in the first quarter of this year and the company cut its spending forecasts for 2018, saying it would spend less than $3 billion (£2.21bn). Tesla spent $3.4 billion in 2017.

Free cash flow, a key metric of financial health, widened to negative $1 billion (negative £740m) in the first quarter from negative $277 million (negative £204m) in the fourth quarter of 2017, excluding costs of systems for its solar business.

Despite the news, markets were fairly unresponsive at the close of the Nasdaq stock exchange that day, with Tesla’s total market capitalisation – its total share value multiplied by shares held – standing at $51.3 billion (£37.7bn).

However, CEO Elon Musk’s perceived rude treatment of financial analysts on the teleconference call wiped $2 billion (£1.47bn) off the electric vehicle company’s stock overnight, after trading closed that day.

Financial markets reacted sharply to the exchange with a nosedive in the business’ shares, which fell by 7.9 per cent at their lowest point to $277.49 (£205).

The total taken off the company’s market valuation at this point on Thursday, May 3, was $3.7bn (£2.75bn).

Prices have recovered slightly in the aftermath, with Musk confident that this upward trend will continue.



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