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Tesla chief Elon Musk on April 29 called the coronavirus confinement a "fascist" action and "an outrage" that infringes on personal freedom and will damage the economy. File photo: AFP

Elon Musk decries ‘fascist’ coronavirus stay-at-home orders putting Tesla’s hot streak at risk

  • Tesla is worried about being able to resume production in the San Francisco Bay area, where authorities have extended a stay-home order to the end of May
  • CEO Elon Musk, in an emotive Tesla earnings call, ranted against the orders and said they were ‘not democratic’
Elon Musk went on a profane rant during another emotive Tesla earnings call, excoriating stay-at-home orders that are putting the electric-car maker’s red-hot run at risk.

“This is fascist. This is not democratic, this is not freedom,” the chief executive officer said after reporting Tesla’s first-ever profit to start a year. “Give people back their godd--- freedom.”

Tesla is worried about being able to resume production in the San Francisco Bay area, where authorities have extended a stay-home order to the end of May. The Model 3 maker’s only assembly plant in the US still produces the majority of the company’s cars and has been idle since March 23.

Investors shrugged off the outburst, with Tesla shares finishing the late trading session up 8.7 per cent. The company’s third straight quarterly profit and revenue of almost US$6 billion both beat analysts’ estimates, extending an advance for a stock that is already the biggest gainer on the Nasdaq 100 Stock Index this year.

“It was vintage Elon. I wish he hadn’t done it,” Gene Munster, managing partner at Loup Ventures, said by phone. “But most investors don’t care. It doesn’t change the reality, which is that Tesla is making meaningful progress toward being a major player in the auto industry.”

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The stock surge Musk, 48, has engineered by producing and delivering more cars than expected early this year has positioned him to receive the first set of stock options from a pay package that set moon shot goals two years ago.

By continuing to build up the shares, bulls are overlooking uncertainty about how soon the company will be able to resume production at its sole US vehicle-assembly plant in Fremont, California, or how eager consumers will be to purchase Tesla cars once health orders are loosened and lifted.

“It is difficult to predict how quickly vehicle manufacturing and its global supply chain will return to prior levels,” Tesla said in its quarterly update. “Due to the wide range of potential outcomes, near-term guidance of net income and free cash flow would likely be inaccurate. We will again revisit our 2020 guidance in our Q2 update.”

During the debut quarter for the new Model Y crossover, automotive gross margin improved to 25.5 per cent, the highest in a year and a half.

While Tesla stopped short of restating its January forecast for deliveries to “comfortably” exceed 500,000 vehicles this year, the company said it believes it can achieve industry-leading operating margins and profitability.

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“Gross margin was mostly the thing that sticks out to me on the positive side,” Ben Kallo, an analyst at Robert W. Baird with the equivalent of a hold rating on Tesla, said by phone. “On the question-mark side, I have to wonder why they didn’t talk about demand at all.”

Tesla managed to build about 14,000 more vehicles than it handed over to customers in the quarter, despite being forced to suspend production at its factory in California late last month. Inventory build-up led the company to burn through about US$895 million in cash during the period. Tesla still ended March with US$8.1 billion on its balance sheet after raising money through a stock offering in February.
Musk will postpone initial deliveries of Tesla’s Semi truck again to 2021 – roughly two years later than initially planned – as the company prioritises starting output of the Model Y crossover in Shanghai and building a factory in Germany from which it aims to begin shipping cars in the middle of next year.

“Tesla investors are looking past the June quarter,” Dan Ives, a Wedbush analyst who rates the stock a hold, said by phone. “The bulls could take this and run.”