Tesla to push forward with Model 3 launch, despite making a loss

Tesla has announced to go through with the planned launch of its mass-market Model 3 electric vehicle in the second half of 2017, despite making a loss in its fourth quarter.

Following a profitable third quarter, Tesla reported a loss of $121.3m (£96.9m) in the fourth quarter of 2016, with a revenue of $2.28 billion (£1.8 billion). 

However, this was a narrower loss than $320 million at the end of 2015, which saw a revenue of $1.24 billion. Tesla’s annual gross revenue in 2016 was $7 billion. 

Tesla states that the gross margin declined due to lower Zero Emission Vehicle sales in the fourth quarter. 

The company ensures that development and manufacturing of the Model 3 is on track, with production beginning in July 2017. 

"Tesla is a fast-growing company and it's rare for it to report a quarterly profit, but these results are encouraging," says Ana Nicholl, automotive analyst at the Economist Intelligence Unit. "Losses have narrowed on an annual basis. That's despite the fact that Tesla has been investing heavily in recent months - partly in its acquisition of the SolarCity energy business and partly in its Model 3 Gigafactory. Both of those have left it with some heavy debts and other liabilities, but its revenues are rising rapidly too."

Tesla has received more than 400,000 pre-orders for the Model 3, and aims to ramp up production to half a million a year by 2018. Nicholl suggests those figures indicate that revenues will rise, while Tesla's direct-selling models should keep margins high as well.

Initial crash tests have been positive and installation of manufacturing equipment is underway in the Fremont facility in California and Gigafactory 1 in Nevada, where battery packs for the car are already being produced, according to Tesla.  

The company is also expected to finalise locations for more Gigafactories this year. On top of that, it is expanding its mobile repair service to allow for vehicle repairs in the owner’s home or office, as well as doubling Supercharger locations in North America. 

Tesla predicts to deliver 47,000 to 50,000 Model S and Model X vehicles combined in the first half of 2018.  The earnings included Tesla’s acquisition of SolarCity, whose solar roof is also planned for launch towards the end of 2017.