How Tesla shares surfaces with a loss of $408m loss?

Losses come even as Elon Musk’s company says it’s delivering a record-breaking number of vehicles

Elon Musk’s electric car company, Tesla shares tumbled more than 11% , after the company reported a larger than expected $408m loss in its second quarter earnings and announced the departure of its chief technology officer (CTO).

Tesla struggles to fulfill its ambitious goals and promises on a long-term basis, and stumbles at logistical impediments despite huge advances in technology that keep consumers and investors interested.

Tesla is still struggling to prove it is profitable and has suffered a series of high-profile exits. JB Straubel, CTO, has replaced by the vice-president of technology, Drew Baglino, Elon Musk, Tesla’s CEO, announced.

“This has nothing to do with lack of confidence for the company,” Straubel said on the call. “I will be helping as I can, just no longer in an executive role.”

More than a dozen executives have departed Tesla in the past year, including the vice-president of interior and exterior engineering Steve MacManus, the vice-president Peter Hochholdinger, and the European leader Jan Oehmicke in 2019 and in 2018 the chief financial officer Deepak Ahuja, among others.

The quarterly earnings report an adjusted net loss of $1.12 per share, which was worse than the $0.31 loss expected. The company’s shares have plunged by more than 20% so far this year while the Standard & Poor’s 500 index has surged by 20%. The company also generated $614m in cash during the quarter. But analysts say the earnings are concerning.

On the call, Musk said Tesla expects to break even this quarter and make a profit by next quarter. He said, the company would focus more aggressively on service facilities in upcoming quarters. In quarter two, it opened 25 new service centers while facing complaints from customers about service operations.

The losses in quarter two come despite Tesla previously reporting it delivered a record-breaking 95,356 vehicles and produced a record 87,048 vehicles, but analysts noted selling cars may not necessarily lead to profit.

Former and current Tesla employees said they were forced to take shortcuts to meet these aggressive production goals.Tesla needs to refocus its efforts from maintaining the appearance of a profitable and sustainable business model to actually delivering one.

An expert says, Tesla has the opportunity to grow, it’s just about where and how, and for how long. The answers are China, building (and keeping) strong local partnerships, and as long as they stay focused (i.e. Hyperloop competitions may not be the best choice right now). It’s easy to think about how an American company will grow in America or Europe, but Tesla faces two hurdles here – first, the majority of US consumers face difficult economic conditions, which points to a saturation of the market for Tesla, at least for now. Second, Europe is always slower to change habits, especially when it comes to their auto engineering and style lineage (think football club loyalty). So in the near term, growth is definitely possible, it just comes with other challenges.”