Tesla Loses $50M Development Costs From Model S

Tesla loses $50M from Model S development costs, even though the automaker produced a record 7,535 cars. The news spread to Wall Street as Tesla shares fell 7 percent to $187.50 in after-hours trading.

The company also said Wednesday that California is now in the running for a $5 billion battery factory it plans to build. Previously the company was only considering Arizona, New Mexico, Texas and Nevada for the factory, which is scheduled to begin producing lithium-ion batteries for Tesla’s Fremont, California, car factory in 2017.

Tesla CEO Elon Musk said the company will prepare two separate sites for the battery factory to minimize the risk of delays. Work may begin as early as next month on one of the sites, he said. He wouldn’t say which states are the finalists. California is a possible choice, he said, if the government can streamline the permitting process.

Musk said the gigafactory, as it’s known in the company, will help Tesla cut its battery costs by 30 percent. But it has to be built by 2017 to supply batteries for the company’s lower-cost Generation Three vehicle.

“If we don’t have the gigafactory online when have the vehicle capacity online, we will be in trouble,” Musk told analysts on the company’s earnings conference call.

For the January-March quarter, research and development costs jumped 49 percent to $81.5 million as Tesla prepares to launch the Model X crossover next year. Musk said the Model X has some tricky issues, including the seals around its unique back doors, which slide upward instead of opening outward.

Tesla is also spending money to adapt the Model S for international markets including the United Kingdom, Japan and Hong Kong.

Finally, Musk said the company is still spending on improvements to the existing Model S. For example, Tesla installed additional safety equipment on new and existing Model S sedans after a government investigation into two Model S battery fires. In both cases, road debris punctured an aluminum shield and the battery, touching off fires. No one was injured, but the cars were destroyed. The government closed its investigation in March.

For the quarter that ended on March 31, Tesla posted a loss of 40 cents per share compared with a profit of 10 cents per share in the January-March period last year. That was the decade-old company’s first profitable quarter.

Revenue grew 10 percent to $620.5 million in the latest period.




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