Tesla; A Streetcar Named Desire

You’ve no doubt heard of the demand curve. But have you considered its close cousin, the desire curve? Elon Musk, CEO of Tesla Inc., shared some thoughts on this during Wednesday evening’s earnings call:

Let’s agree that people without access to adequate funds cannot buy things costing more than those inadequate funds. Plus – and this is the real kick in the teeth – those same people still sometimes want those things. Musk was responding to a question about why, if Tesla suffers from supply constraints rather than constrained demand, it had cut prices. Much of his answer didn’t really address that. Words to the effect of “our product may have intrinsic value approaching infinity, but not everyone has infinite money, so we charge a market price of quite a bit less than infinity” add up to a boast about what a fabulous bargain that product is. Fair enough, but ultimately just sales patter.

Despite delivering a record number of its electric vehicles in the second quarter, Tesla endured another round of financial losses despite pressure to become steadily profitable.

The losses come as the company is still spending heavily on capital projects. CEO Elon Musk said the automaker is on target to open a plant in China by the end of the year and is making plans for another in Europe.

The company is also ramping up to start producing its next vehicle, the mid-priced Model Y SUV, later this year. Tesla said it will potentially be more profitable than the Model 3 sedan, with which he shares about three-quarters of its parts.

"Tesla is expanding at an exponential rate," Musk said.

But it is still losing money at faster clip than predicted by analysts. Tesla lost $408.3 million in the quarter, an improvement from a $718.1 million loss a year earlier. Revenue totaled $6.35 billion, up 59% from a year earlier.

&P Global Market Intelligence analysts had estimated second-quarter revenue of $6.44 billion in revenue and a net loss of $298 million.

Musk said he expects the automaker to come close to breaking even in the current quarter and to make a profit in the final quarter. He also said demand continues to be strong.