June 11, 2019 / 10:16 PM / a year ago

Tesla is serious about a possible record quarter, not so serious about a submarine car

(Reuters) - Tesla Inc has “a decent shot at a record quarter on every level”, Chief Executive Officer Elon Musk said at the company’s annual shareholder meeting on Tuesday, soothing concerns about weak demand for the electric car maker’s sedans.

FILE PHOTO: SpaceX founder Elon Musk speaks at a post-launch news conference after the SpaceX Falcon 9 rocket, carrying the Crew Dragon spacecraft, lifted off on an uncrewed test flight to the International Space Station from the Kennedy Space Center in Cape Canaveral, Florida, U.S., March 2, 2019. REUTERS/Mike Blake

Tesla’s stock rose 3.6% to $225 in extended trading, and Musk also said the company was on track to hit its volume production goal by the end of this year.

Musk was treated as a star by investors at the annual meeting, receiving applause as he laid out plans for global expansion and going so far as to tell an inquiring investor that Tesla engineers “actually have a design for a submarine car”. He said making one would be a distraction and have a small market.

Analysts have questioned whether there is global demand for the hundreds of thousands of Model 3 sedans and other vehicles Tesla aims to produce, after deliveries fell 31% in the first quarter. Rivals are stepping up efforts and Tesla continues to invest heavily in expansion.

Musk’s positive comments on Tuesday echoed his forecast last month that the company was on track to hit record deliveries in the second quarter.

Tesla previously said it plans to deliver 90,000 to 100,000 vehicles to customers in the second quarter versus 63,000 vehicles in the first, and is aiming to deliver 360,000 to 400,000 vehicles in 2019.

But ramping production strains finances, and Tesla is increasing output at its U.S. factory, launching production in China, overhauling its U.S. retail and service operations and developing new models.

“It’s hard to be profitable with a high growth rate,” Musk said, expressing confidence that Tesla would be “cash flow positive” despite those challenges.

Tesla lost $702 million in the first quarter and has said profit would be delayed until the latter half of the year.

Musk’s plans include unveiling an electric pickup truck this summer and getting into semi truck production toward the end of next year. He said he hoped to have an investor day on batteries by the end of the year and emphasized that battery production was the key to vehicle production.

“Having to not pay tariffs and have the really long delivery chain and high transport costs will make the cars a lot more affordable to people in Europe and China,” Musk said.

Tesla was likely to settle on a location for a European factory by the end of the year and expects to start selling in India by next year.

Musk also teased that Tesla could get into mining of metals crucial for battery production to further lower costs.

“We’ll do whatever we have to, to ensure that we can scale at the fastest rate possible,” he said.

Musk has faced criticism about his outspoken nature, including Twitter use that led to a settlement with U.S. regulators, but shareholders rejected corporate governance proposals calling for reducing the terms of directors and eliminating some supermajority voting requirements.

Reporting by Ankit Ajmera, Vibhuti Sharma and Rama Venkat in Bengaluru; Editing by Maju Samuel and Lisa Shumaker

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