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Tesla Model 3, Elon Musk’s grail, remains a costly pursuit

Company reports net loss of $771 million in third quarter

Electric car-maker Tesla has now lost money in eight of the last nine quarters.

By Neal E. Boudette New York Times 

On Tuesday, Elon Musk had a Tesla Roadster launched toward an orbit around the sun. A day later, he and his car company came back to Earth.

The electric-car maker said Wednesday that it lost nearly three-quarters of a billion dollars in the fourth quarter as it scrambled to root out glitches from its manufacturing operations and ramp up production of its highly anticipated Model 3 compact car.

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The company reported a net loss of $771 million, more than tripling the loss it reported for the same period a year ago. Revenue increased 44 percent to $3.3 billion, on rising sales of its Model S luxury sedan and Model X, a sport utility vehicle.

On a positive note, Tesla reported it used up only $277 million in cash in the fourth quarter. That was down from $1.4 billion in the third quarter. On a full-year basis, however, the company used nearly $3.5 billion in cash, more than twice the amount it used in 2016.

The company’s loss in the quarter amounted to $3.04 per share on an adjusted basis, slightly less than analysts had forecast, and $4.01 unadjusted.

Its shares were up modestly in extended trading after the earnings report. They had risen 3.3 percent during the regular session.

Analysts fret about the hiccups Tesla has encountered and how much money it must spend while trying to move into high-volume production.

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“Cash burn does matter, as it is a finite resource, and ramp delays on the Model 3 only exacerbate the cash burn,” Brian Johnson, a financial analyst at Barclays, wrote in a note to investors.

Putting the Model 3 into mass production is a critical task for Tesla and Musk, its chief executive. The company has taken $1,000 deposits from about 400,000 customers interested in buying the car. If it can begin producing the car rapidly, it will see its sales and revenue soar — and could vault into profitability.

The quarterly loss and new details about Model 3 production and the amount of cash the company is spending come at a sensitive time. Tesla has now lost money in eight of the last nine quarters, and the company has consistently overestimated how quickly it would be able to ramp up production of the Model 3.

Just two years ago, Musk hoped to produce 500,000 by 2018. The ambitious forecast helped drive Tesla stock, pushing its market value above that of General Motors and Ford Motor for a period of time in 2017.

Last July, as Model 3 production was about to begin, Musk ratcheted back expectations, resetting his target to 20,000 vehicles a month by December. But difficulties producing battery packs at its Nevada plant and other glitches in the car’s assembly process combined to slow output to a crawl.

Tesla built just 260 by the end of September. In January, it said it had made only 2,425 in the final quarter of 2017 and set a goal of increasing output to 5,000 a month by the end of the first quarter.