TSLA Tesla Inc

By Mike Ramsey 

Tesla Motors Inc. said on Wednesday it would ramp up annual production to a half-million vehicles two years earlier than planned, but the electric-car maker will be doing so without two top manufacturing executives.

The Palo Alto, Calif., company nearly doubled its first-quarter loss compared with the same period a year ago, even as sales of its pricey sedan and sport-utility vehicle continued to climb. Tesla abandoned a plan to generate positive cash flow in 2016 as it pours money into its coming Model 3, a $35,000 and up car that it now says will help it sell 500,000 cars by 2018.

The company aims to start churning out Model 3s in the second half of next year. It has a goal of building a total of between 100,000 and 200,000 by year end.

Tesla has struggled to build its current products on time and free of glitches. Problems with the doors and seat latches on the $81,000 and up Model X SUV over the last six months have dented the company's image.

On Wednesday, Tesla said two high-ranking executives involved with output -- Production Vice President Greg Reichow and Manufacturing Vice President Josh Ensign -- have already left or will be leaving the company.

Mr. Reichow had been with the car maker since 2011 and had run its powertrain engineering before taking over production. He will stay until a replacement comes on board, Tesla said. Mr. Ensign headed manufacturing and has left the company.

The departures aren't altogether surprising. Founded in 2003, Tesla has lost a number of executives over the past year as rival electric-car startups and technology companies recruit its employees. Among recent departures: Vice President of Worldwide Finance Michael Zanoni, and Jim Chen, its assistant vice president of regulatory affairs.

"Tesla is going to be hell-bent on becoming the best manufacturer on earth. Thus far, I think we've done a good job on design and technology on our products," Chief Executive Elon Musk said in a conference call with investors on Wednesday. "The key thing we need to do in the future is to also be a leader in manufacturing. It's a thing we need to obviously solve if we are going to scale and scale rapidly."

In a letter to shareholders, Mr. Musk reiterated a target of selling between 80,000 and 90,000 vehicles this year despite the first quarter shortfall. He also said "increasing production five fold over the next two years will be challenging and will likely require some additional capital."

Wall Street analysts have been closely watching the company's cash burn, and some have speculated it would need to sell addition shares to finance its production push.

Tesla's new production goal comes after nearly 400,000 people placed orders for the Model 3, which is projected to go at least 215 miles on a charge. Reservations required $1,000 refundable deposits and produced hundreds of millions of dollars in new funds during the quarter. Those monies helped bolster Tesla's finances and gave it confidence to pull forward its production plans, officials said.

Mr. Musk, on the call with reporters, estimated Tesla's 2020 production would be 1 million vehicles. Tesla, however, missed its delivery forecast in its first quarter because of a parts shortage for the Model X and other production issues.

It shipped 14,820 vehicles, fewer than the 16,000 cars it had pledged to deliver. It also borrowed $430 million from its line of credit in the quarter, allowing it to increase its cash balance to $1.44 billion at the end of March.

The company used some of the $1,000 deposits submitted for Model 3 orders to help repay $350 million on its credit line after the quarter ended.

Tesla had promised to start generating cash in 2016, but to ramp up production of the Model 3 more quickly it abandoned that pledge and said its capital spending now may rise to $2.25 billion, up from the $1.5 billion forecast earlier.

Tesla reported a first quarter loss of $283 million, or $2.13 a share, as the lower-than-expected deliveries hurt revenues. On an adjusted basis, Tesla lost 57 cents a share, slightly less than the 58-cent loss average compiled by Thomson Reuters.

Revenue for the quarter rose 22% from a year earlier to $1.15 billion and its gross margin declined, excluding the $57 million it was paid for selling pollution credits to other car makers.

Write to Mike Ramsey at michael.ramsey@wsj.com

(END) Dow Jones Newswires

May 04, 2016 19:03 ET (23:03 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.