Tesla Falls as CEO Musk Predicts Chinese Sales Decline

Tesla Motors Inc. tumbled the most in more than two months after Chief Executive Officer Elon Musk cited slowing sales in China amid charging concerns and said the electric-car maker won’t become profitable until 2020, when annual deliveries reach 500,000.

Tesla fell 5.7 percent to $192.69 at the close in New York, for the biggest one-day drop since Oct. 27. The stock’s slide came after Musk’s first-ever appearance at the Automotive News World Congress yesterday, where he reiterated a comment about China that he made a day earlier to Bloomberg News. The shares, which had gained 48 percent in 2014, are down 13 percent this year.

Musk also elaborated on the idea that he isn’t chasing profitability in the short term. He said the company is investing in growth and new models and probably won’t make money on a net basis until sales reach 500,000 cars a year after this decade.

“I expect we’ll achieve profitability in 2020,” said Musk, who added that Tesla will be making a “few million cars” annually by 2025. On an adjusted basis, the company should remain profitable before 2020, he said.

Although such sales volumes are higher than any he’s discussed before, the prospect of not earning a profit until 2020 may frustrate investors, said Maryann Keller, an independent automotive consultant in Stamford, Connecticut.

Longer Wait

“Before this statement, investors may have speculated that a real profit might come in 2017 or 2018,” she said. “Now they can see they may have to wait for five years.”

Brian Johnson, an analyst with Barclays Plc, had predicted in November that on generally accepted accounting principles Tesla would earn $125 million by 2015.

China will accelerate building electric vehicle charging facilities, the website Caixin reported. Chinese consumers have been reluctant to switch to EVs because of reliability concerns and a lack of charging infrastructure.

Musk said those concerns were unfounded and puzzling.

“China is a small percentage of our sales right now,” Musk said in an interview on Monday in California, describing the market as “a wild card that seems to change for reasons we don’t understand.”

Lost sales in China are being more than being made up for in Europe and North America, he said in Detroit.

Musk’s remarks, made to a packed audience in the Renaissance Center where General Motors Co. has its headquarters, follow announcements this week that other automakers are ratcheting up their electric powertrain efforts.

Chevy Bolt

On Monday, GM unveiled the Chevrolet Bolt EV, an all-electric concept car that the company said will go 200 miles (320 kilometers) per charge and cost about $30,000 after government incentives. The Bolt is slated to go on sale, said a person familiar with the plan, in 2017 -- the same year that Tesla aims to introduce its more affordable Gen 3.

Electric vehicles remain a small fraction of the global auto industry.

Tesla had said it would probably deliver 33,000 of its Model S sedans in 2014, down from an earlier forecast of 35,000 because of capacity constraints. By 2020, when the company is making batteries at a massive factory in Nevada and producing its lower-priced Model 3, sales should rise to 500,000 cars and the company will be profitable, Musk said.

Despite his business model that challenges industry conventions, he was warmly received by the Michigan audience.

“I think Elon is fundamentally trying to change the industry to go electric,” said Chris Meyer, a Model S owner and CEO of George P. Johnson, the firm that made Tesla’s auto-show stand. “I think he honestly is trying to get Detroit and its auto manufacturers to go electric.”

After the speech, Musk told reporters that he’s “committed to staying at Tesla as long as I’m alive. I might not be the CEO, but I will be with the company forever. I’ve committed to stay CEO through volume production of Model 3, then I’ll re-evaluate.”

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