After being gutted by larger-than-expected second-quarter losses, Tesla CEO Elon Musk announced that JB Straubel, Tesla co-founder and longtime chief technology officer, is transitioning to an advisory role, as discussed during the earnings call Wednesday.
As a co-founder of Tesla, Straubel is credited with bringing Musk on board, and his engineering leadership has seen the company through its iconic feats for the past 16 years. Drew Baglino will be taking over for Straubel.
Though the trailblazing electric-car company produced a record number of cars, it lost $408 million in the second quarter. However, that figure largely reflects one-time events and on an adjusted basis the second-quarter earnings loss is closer to $120 million.
Shares fell more than 11 percent in the hours following the report.
An independent brokerage firm reported that Tesla won't see profitability until 2021 -- which Tesla strongly disputed -- and says revenue would not return to near second-quarter 2019 levels until the third quarter of 2020. According to the firm's report, margins will likely be under pressure if they cannot lower Model 3 car production costs to a point where the $39,000 version is profitable.
“From a profitability standpoint, we expect to be probably around breakeven this [third] quarter and profitable next quarter," Musk said in the earnings call.
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Despite these blows, losses are down from the $702 million from the last quarter. The company attributes this to its record-breaking delivery of 95,000 cars. It plans to cut further production costs by improving production at its battery plant outside of Reno, Nevada and car assembly in Fremont, California, as well as starting production in China by the end of the year, lowering prices with regional regulatory credits.
"Ultimately, the Model 3 is accomplishing what our business needs it to do. It expanded our sales and customer base, enabling us to generate cash we need to reinvest," Chief Financial Officer Zachary Kirkhorn said. "In the process, we've appropriately managed our operating expenses and have reduced the cost of running the business."
As Tesla -- which plans to expand beyond cars -- moves into the rest of the year, it faces steep competition from Ford, which premiered an all-electric utility truck this week that can tow 1 million pounds. Mainstream manufacturers like Toyota and Honda also have electric alternatives.
An earlier version of this story incorrectly stated that losses are "up from the $702 million from the last quarter" when they are actually down.