Musk’s remarks were welcomed by investors, who continued to bid up Tesla in pre-market trading with shares gaining 2.5%, after rising in New York Tuesday. The stock is down 35% since the start of the year.
Wall Street analyst reaction was tempered by continued concern about sales of the automaker’s Model 3 sedan. “Musk and Tesla provided investors with more useful information than we expected heading into this event, yet this clearly remains a prove me story in the near-to-medium term,” Wedbush Securities analyst Daniel Ives said in a research note after the meeting. “We need to see improving Model 3 demand globally this quarter coupled with profitability” in the second half of the year, the note said.
Tesla expects to grow its fleet of vehicles by 60-80% this year, Musk said after doubling it last year. But he added that fast-paced expansion makes it harder for the company to stay in the black. “It’s hard to be profitable with that level of growth,” Musk said. “We could slow it down, but then that would not be good for sustainability and the cause of electric vehicles.”
Musk said Tesla expects to begin volume production of the Model Y SUV toward the end of next year, targeting “a car factory on each continent.” He said that equipment, including stamping machines, a paint shop and battery module lines, are being installed at the company’s “gigafactory” in Shanghai, but did not announce who the battery supplier is. The company is actively searching for a European plant site and hopes to make a decision on location by year-end, Musk said.
As part of his quest to collapse the battery supply chain, he mused about the possibility of delving into raw-material production. “We might get into the mining business, I don’t know,” he said. “We’ll do whatever we can to make sure we can scale as fast as possible.”
Robyn Denholm, Tesla’s recently appointed chairman, spoke to investors as the meeting got under way and thanked them for their “intestinal fortitude.” Tesla’s board of directors, including Oracle founder Larry Ellison, sat in the front row. J.B. Straubel, Tesla’s chief technology officer, and Drew Baglino, Tesla’s vice president of technology, joined Musk on stage.
Musk appeared relaxed and ebullient at the meeting, joking that the wildly popular “Fart Mode” feature — in which the car emits audible sound effects that can be programmed for specific seats–is “perhaps my finest work.” He also repeated a pledge to have 1 million cars capable of full self-driving on the roads next year, but used more conservative language and stressed that the company would still need regulatory approval.
“Musk was calm, confident, and articulate in a way that we haven’t seen in his last several public appearances,” wrote Gene Munster of Loup Ventures in a note. “In the past, when Tesla has been struggling, Musk has been visibly troubled himself, and we didn’t see that today.”
During the Q&A part of the meeting, several shareholders–many of whom own and love their Tesla cars–stood in line to ask Musk questions on everything from plans to enter India as a market to a non-leather steering wheel option.
Some spoke about what they perceive to be as routinely negative mainstream media coverage of Tesla. Dennis McEvoy, who owns a Model S and a Model 3, said that many people think that Tesla cars are made with shoddy quality, spontaneously combust and that the company is on the verge of bankruptcy.
“The company has done a fantastic job of solving the big issues that confronted them in manufacturing and engineering,” said McEvoy. “What’s the plan to put more energy behind the marketing communications and take this issue head on, so that the true great American success story gets told?”
Musk said he was unsure what to do about “the most crazy disinformation campaign I’ve ever seen,” saying he was reluctant to use paid advertising. He specifically called out Bloomberg News for what he termed “quite a few negative stories.” Baglino urged shareholders to help counter that media narrative by sharing their positive outlook through word-of-mouth endorsements.
Of eight proposals offered at the meeting, the company said six passed. Proposal 4, which would have eliminated super-majority voting requirements, and Proposal 5, which was designed to reduce director terms from three years to two years, were supported by the board but failed to reach the two-thirds threshold required. The results of the votes will be formally announced in an 8-K to be filed within four business days.