Elon Musk is delivering on one big promise -- a $35,000 (Dh128,537) Model 3 -- while falling short on another: that Tesla's days of losing money are over.
Tesla probably will not post a profit in the first quarter, the chief executive officer told reporters, contradicting several of his past predictions that the company would earn money from now on. He made the comments while announcing the long-awaited cheaper Model 3, along with a plan to trim costs by closing stores and cutting more jobs.
"Given that there was just a lot happening in Q1, and we're taking a lot of one-time charges and there are a lot of challenges getting cars to China and Europe, we do not expect to be profitable in Q1," Mr Musk said on a call with reporters. "But we do think that profitability in Q2 is likely."
Tesla shares fell as much as 4.1 per cent to $306.80 in late trading, paring gains related to Mr Musk teasing an announcement.
The stock is still up from where it was two days earlier, when the CEO tweeted the company had news to share.
Shifting to online-only ordering will enable Tesla to lower the prices of all its vehicles by an average of about 6 per cent, according to a blog post. That's helping Mr Musk deliver the $35,000 version of the Model 3 for the first time, almost three years after the company started taking orders for the car.
Tesla will also be "significantly reducing" its spending on sales and marketing, which will help make the announced price changes possible, Mr Musk wrote in an email to employees. Some jobs
will be cut and some employees will transition to different parts of the company, he said.
"Tesla pioneered direct-to-consumer sales, and the stores were always more of an advertising portal than an actual transaction portal," said Mike Ramsey, an automotive consultant with researcher Gartner.
"Closing the stores themselves is not that crazy; the real issue for Tesla is their service
capability."
The company will wind down many of its stores over the next few months, Mr Musk said. Some of the roughly 130 outlets will remain in high-traffic locations as galleries, showcases and information centers, and others will become service and repair centers.
"There's no other way for us to achieve the savings required," the CEO said.
Mr Musk reiterated that improving service in 2019 is Tesla's top priority and said the company will be adding jobs worldwide to address what's become one of the biggest concerns of new customers. He said moving away from stores will be "incredibly helpful" toward boosting deliveries.
"In many parts of the US, we are unable to sell effectively because of franchise laws," he said. "Now anybody can buy the car online anywhere in the US, immediately. This substantially opens up our ability to sell the cars."
Model 3s on backorder now will all be delivered by the end of June, in time to claim a $3,750 federal tax credit, as the company ramps up production, Mr Musk said. As of July 1, Teslas will be eligible for only an $1,875 U.S. incentive.
Mr Musk issued yet another forecast for how many vehicles Tesla will produce this year, predicting somewhere in the range of 420,000 and 600,000. Three days ago, the US Securities and
Exchange Commission asked a federal judge to hold him in contempt of a settlement reached last year over a tweet in which he said the company would make as many as half a million cars.
The CEO doubled down on his defense against the SEC's claims by reiterating comments he made on a Jan. 30 earnings call that Tesla would sell as many as 500,000 Model 3s this year.
"350,000 to 500,000 Model 3s is what I said in the earnings call," Mr Musk told reporters. "And we expect to make somewhere between 70,000 to 100,000" Model S sedans and Model X crossovers.
Mr Musk, 47, settled a lawsuit in September with the SEC and agreed to get company approval before communicating material information to investors. The agency alleges he breached that deal with a Feb. 19 tweet, which he corrected hours later with the help of a company lawyer.
The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
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Film: In Syria
Dir: Philippe Van Leeuw
Starring: Hiam Abbass, Diamand Bo Abboud, Mohsen Abbas and Juliette Navis
Verdict: Four stars
How to get there
Emirates (www.emirates.com) flies directly to Hanoi, Vietnam, with fares starting from around Dh2,725 return, while Etihad (www.etihad.com) fares cost about Dh2,213 return with a stop. Chuong is 25 kilometres south of Hanoi.
What the law says
Micro-retirement is not a recognised concept or employment status under Federal Decree Law No. 33 of 2021 on the Regulation of Labour Relations (as amended) (UAE Labour Law). As such, it reflects a voluntary work-life balance practice, rather than a recognised legal employment category, according to Dilini Loku, senior associate for law firm Gateley Middle East.
“Some companies may offer formal sabbatical policies or career break programmes; however, beyond such arrangements, there is no automatic right or statutory entitlement to extended breaks,” she explains.
“Any leave taken beyond statutory entitlements, such as annual leave, is typically regarded as unpaid leave in accordance with Article 33 of the UAE Labour Law. While employees may legally take unpaid leave, such requests are subject to the employer’s discretion and require approval.”
If an employee resigns to pursue micro-retirement, the employment contract is terminated, and the employer is under no legal obligation to rehire the employee in the future unless specific contractual agreements are in place (such as return-to-work arrangements), which are generally uncommon, Ms Loku adds.
What should do investors do now?
What does the S&P 500's new all-time high mean for the average investor?
Should I be euphoric?
No. It's fine to be pleased about hearty returns on your investments. But it's not a good idea to tie your emotions closely to the ups and downs of the stock market. You'll get tired fast. This market moment comes on the heels of last year's nosedive. And it's not the first or last time the stock market will make a dramatic move.
So what happened?
It's more about what happened last year. Many of the concerns that triggered that plunge towards the end of last have largely been quelled. The US and China are slowly moving toward a trade agreement. The Federal Reserve has indicated it likely will not raise rates at all in 2019 after seven recent increases. And those changes, along with some strong earnings reports and broader healthy economic indicators, have fueled some optimism in stock markets.
"The panic in the fourth quarter was based mostly on fears," says Brent Schutte, chief investment strategist for Northwestern Mutual Wealth Management Company. "The fundamentals have mostly held up, while the fears have gone away and the fears were based mostly on emotion."
Should I buy? Should I sell?
Maybe. It depends on what your long-term investment plan is. The best advice is usually the same no matter the day — determine your financial goals, make a plan to reach them and stick to it.
"I would encourage (investors) not to overreact to highs, just as I would encourage them not to overreact to the lows of December," Mr Schutte says.
All the same, there are some situations in which you should consider taking action. If you think you can't live through another low like last year, the time to get out is now. If the balance of assets in your portfolio is out of whack thanks to the rise of the stock market, make adjustments. And if you need your money in the next five to 10 years, it shouldn't be in stocks anyhow. But for most people, it's also a good time to just leave things be.
Resist the urge to abandon the diversification of your portfolio, Mr Schutte cautions. It may be tempting to shed other investments that aren't performing as well, such as some international stocks, but diversification is designed to help steady your performance over time.
Will the rally last?
No one knows for sure. But David Bailin, chief investment officer at Citi Private Bank, expects the US market could move up 5 per cent to 7 per cent more over the next nine to 12 months, provided the Fed doesn't raise rates and earnings growth exceeds current expectations. We are in a late cycle market, a period when US equities have historically done very well, but volatility also rises, he says.
"This phase can last six months to several years, but it's important clients remain invested and not try to prematurely position for a contraction of the market," Mr Bailin says. "Doing so would risk missing out on important portfolio returns."
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Places to go for free coffee
- Cherish Cafe Dubai, Dubai Investment Park, are giving away free coffees all day.
- La Terrace, Four Points by Sheraton Bur Dubai, are serving their first 50 guests one coffee and four bite-sized cakes
- Wild & The Moon will be giving away a free espresso with every purchase on International Coffee Day
- Orange Wheels welcome parents are to sit, relax and enjoy goodies at ‘Café O’ along with a free coffee
Dhadak 2
Director: Shazia Iqbal
Starring: Siddhant Chaturvedi, Triptii Dimri
Rating: 1/5
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