Brushing Aside Demand Fears Elon Musk Says Tesla Has ‘Decent Shot’ At Record Second Quarter

Tesla shares have been hammered this year over worries about its financial health and demand for Model 3 sedans, but CEO Elon Musk brushed aside those concerns at the company’s annual meeting and said the electric-car maker has a chance of posting record second-quarter results.  

The billionaire entrepreneur spoke to an enthusiastic audience of shareholders on Tuesday in Mountain View, California, on topics ranging from media coverage of Tesla that makes him ”sad,” a future electric pickup truck and the possibility the company may mine its own lithium. But in the near term, nothing is as important as demand in the current quarter that ends this month.

“There is not a demand problem. There is absolutely not,” Musk said. “Sales have far exceeded production and production has been pretty good. We’re actually doing well and we’ve got a decent shot at a record quarter on every level. If not it’s going to be very close.”

That would be a big reversal after a lousy first-quarter in which Tesla fell back into the red with a $702 million loss due to weaker-than-anticipated deliveries of Model 3s, S sedans and X crossovers. It raised $2.7 billion in May selling debt and equity to help fund capital expenses, though analysts have pointed out the company could have done so at better terms in late 2018 when the shares were rising after record third-quarter results.

Musk also launched an aggressive cost-reduction program in May–after having done so a year earlier–and said the newly raised funds were only sufficient to get through 10 months if it “spending as it did in the first quarter of 2019,” according to an internal memo obtained by CNBC.

Those developments contributed to a 35% drop in Tesla shares this year, from $332.80 at the end of 2018 to $217.10 in Nasdaq trading Tuesday, ahead of the meeting.

Musk also said that “90% of orders” for its electric vehicles in this quarter are from “non-reservation holders, so these are new customers.” After he unveiled the Model 3 in 2016, promising a base price of $35,000, Tesla quickly racked up more than 400,000 reservations for the car. Delays in delivery a version at that price led some would-be buyers to cancel their reservation, though Tesla has never confirmed how many did so. Currently, the cheapest version of Model 3 available on Tesla.com starts at $39,900, before taxes and other fees.

During the meeting, Musk said Tesla’s future product plans, for vehicles including the pickup, Model Y crossover,  a revamped Roadster sports car and Semi, are constrained by how many batteries it can produce and how easily it can get access to all the necessary materials to make them. That includes lithium and other mined materials.

“We’re matching the product rollout to scaling battery production,” he said. “We might get into the mining business, I don’t know … a little bit at least,” he added, without elaborating.

While he joked about his tendency to announce targets Tesla struggles to meet on the timetable he initially lays out, he said that results mainly from being overly “optimistic.” He grew more serious when talking about news coverage that he and some of the shareholders consider to be unfair, particularly with regard to reports of accidents and the safety of Tesla vehicles.

“It’s very distressing. It makes me sad,’ he said. “It’s the most crazy, disinformation campaign I’ve ever seen.”