Tesla CFO sees inventory build reverse, free cash flow turn positive in Q2

CFO Vaibhav Taneja says: “While we did experience higher cost due to the ramp of Model 3 in Fremont and disruptions in Berlin, these costs were largely offset by cost reduction initiatives. In fact, if we exclude Cybertruck and Fremont Model 3 ramp costs, the revenue from auto margins improved slightly. Currently normalized model wide cost Model Y cost per vehicle in Austin and Berlin are already very close to that of Fremont…. On the demand front, we’ve undertaken a variety of initiatives, including lowering the price of both the purchase and subscription options for launching extremely attractive leasing specials for the Model 3 in the U.S. for $299 a month and offering attractive financing options in certain markets. We believe that our awareness activities paired with attractive financing will go a long way in expanding our reach and driving demand for our products… We had negative free cash flow of $2.5B in the first quarter. The primary driver of this was an increase in inventory from a mismatch between builds and deliveries as discussed before, and our elevated spend on CapEx across various initiatives, including AI compute. We expect the inventory build to reverse in the second quarter and free cash flow to return to positive again.” Comments taken from Q1 earnings conference call.