Tesla 4th Quarter Results Not Good: Earnings And Production Miss, 40 kWh Model S Delayed

5 years ago by Jay Cole 32

Few Quarterly Reports Have Been More Anticipated Than Today's From Elon Musk And Tesla

Few Quarterly Reports Have Been More Anticipated Than Today’s From Elon Musk And Tesla

Tesla today reported a wider than expected loss of 62 cents a share (the street estimate was for 53 cents), while revenue for the 4th quarter came in at $306 million ($294 million from auto sales), about $8 million higher than expected.

But what everyone wanted to know was, would Tesla be able to hit benchmarks promised from their last report on November 5th, 2012,:

“Given Tesla’s rate of progress over the past few months, we are confident of being able to deliver 2,500 to 3,000 Model S vehicles in Q4 and over 20,000 in 2013.”

Tesla First "Real" Quarter Result Was Weaker Than Expected

Tesla First “Real” Quarter Result Was Weaker Than Expected

The short answer:  No

…and the shares took a nose-dive in the day after the announcement falling almost 9%.  This  after falling about 2% in the regular trading session yesterday. (Real-time quote here)

Tesla says they delivered about 2,400 cars in the fourth quarter, bringing their yearly total up to just over 2,650.  Overall production of the Model S was said to be at 2,750 units for Q4 and 3,100 overall.

Tesla still plans to deliver 20,000 Model S sedans in 2013, but warns that it likely can only deliver about 4,500 in Q1 of 2013.

  “…we gave the manufacturing team the first week of the year off to celebrate their accomplishments during 2012.” 

To us, this reasoning does not past the smell test, and the miss is more likely affected by Tesla’s attempt to “work the system” and pull 2013 deliveries into 2012 by asking customers to complete transactions before they actually had taken possession of their cars, in order to boast 2012 sales.  Sales that they knew were coming up short.

Tesla Model S

Tesla Expects To Deliver 4,500 Model S EVs In Q1 Of 2013

Statement From Elon Musk on Q4 deliveries:

“During the quarter, we delivered approximately 2,400 Model S vehicles. We delivered the remaining North American Signature Series cars and shipped exclusively cars with the 85 kWh battery pack. We also saw strong demand for options such as the Performance version and Tech Package. Finally, we sold most of our remaining Roadsters during the quarter.”

Tesla did pull ahead the expectations for profitability (on a non-GAAP basis), saying “first profit now expected Q1 2013 versus prior guidance of late 2013.”

Tesla notes the company received about 6,000 new reservations for the Model S in the last quarter of the year, however cancellation rates were also extremely high, and Tesla has yet to achieve the quarterly reservation rate necessary to sell 20,000 vehicles on an ongoing basis.

The forecast for current and future reservations were also not that great:

“New reservations continue at a steady, although slower pace in Q1 2013, as compared to December, due in part to the pull ahead of reservations into Q4 by customers seeking to avoid the price increase. Q1 cancellations are likely to remain elevated as the remaining older reservation holders are invited to configure their vehicles within a set time frame or pay the higher price just like new reservation holders.”

Tesla Hopes The Upcoming Model X Can Assist In Meeting Production And Profitability Forecasts

Tesla Hopes The Upcoming Model X Can Assist In Meeting Production And Profitability Forecasts

Overall, Tesla says that first-quarter gross margins will be in the mid-teens and rise toward its target of 25% in the second half of the year.

Weighing heavy on the company is the fact Tesla is down to about $201.8 million in non-restricted cash after making their first  loan repayment to the U.S. Department of Energy. For the fourth quarter of  2012, cash from operations plus capital expenditures was -$102 million.

For 2012 year end, Tesla had 32 stores and galleries worldwide, and plans to open 15 to 20 more stores and galleries this year.  Tesla will start European deliveries of the Model S this summer, with  Asian deliveries later in 2013.

Also in the “not good news” category is the news that Tesla notes that the delivery of  their entry-level 40 kWh Model S  is now not expected to begin until “later this summer.”

If interested, you can read the results, and Tesla’s shareholder letter here, or Tesla’s actual 8-K filing

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32 responses to "Tesla 4th Quarter Results Not Good: Earnings And Production Miss, 40 kWh Model S Delayed"

  1. Anton Wahlman says:

    I disagree. The 20,000 goal for 2013 remains unchanged. 4,500 in 1Q is consistent with that goal. Profitability is now 3 quarters earlier, which is the big news. This is an incremental positive. The whisper must have been through the roof, explaining the quick stock reaction, stock selling off 8% or so. I imagine that will reverse in due course, as people absorb the news.

    1. Jay Cole says:

      The 20,000 remains only in the talking points Anton. The potential for profitability (non-GAAP) has moved up to because production of the 40 kWh has been moved out. Old forecasts held a truckload of low margin 40 kWh cars going out eary in 2013.

      Today’s misses on earnings, production, deliveres, reservation retention necessary to support 20K (looks like they lost 1,600 reservations booking 2,400 sales), 2013 reservation bookings, and delays on the 40 kWh have hurt credibility, and that is what is affecting the stock price past just the headline numbers.

      BTW…I am no fan of being the heavy no this one. I love the Model S, but there was little in this report that was good (imo). I would however, be delighted to see Tesla sell 20,000+ cars and be profitable long term, (=

      1. Frank says:

        It would be more prudent to compare 1,600 reservation losses against over 6,000 new reservations in the Q4, which is up from almost 2,900 reservations in the preceding Q3

        The company plans to start sales and some deliveries to Europe and Asia this year – both representing larger potential for growth than US markets. They currently have no Model S sales in Asia and very limited sales in Europe.

        Nowhere have I read that the potential Q1 profitability was due to pushing back the rollout of the 40kWh units. Rather it was related to increased production efficiency, operations stabilization and a 15% reduction in R&D, unrelated to any shift in lineup role out.

        This is a small automaker in a new segment of an industry deeply invested in fossil energy. Yet its growing and expanding into new markets, while offering a product that has excellent initial reliability which competes and beats its gasoline counterparts as evidenced by its 2013 Motor Trend Car of the Year award

        1. Jay Cole says:

          Hey Frank,
          I don’t thinks its necessarily something you can ‘read’ somewhere, its more about looking more deeply at the numbers.

          Previously, Tesla did not predict profitability until later in 2013, but the same time, they expected to be producing both 60 kWh and 40 kWh cars in Q1 as part of their 5,000 units.

          Then they pushed everyhing back :

          http://insideevs.com/tesla-60-kwh-model-s-deliveries-delayed-january-february-entry-level-until-march-april/

          …which made the first 6 weeks of Q1 all high end 85 kWh with some 60 kWh built alongside. Now they have pushed 40 kWh completely out of the quarter (and most of next) and bulding all 85 kWh orders as soon as they come in.

          It is easy to see how the automotive margins/projections have drastically changed this quarter due to the profile of the cars they are building. But, at the expense of chewing through almost all the high end order book, they have pushed the low margin cars out further. That is why Musk is so confindent in a thin Q1 margin, but is so guarded on saying the rest of the year will be profitable.

          Old theoretical scenaro:

          1,500 85 kWh
          2,000 60 kWh
          1,500 40 kWh

          New theoretical scenario for Q1:

          3,500 85 kWH
          1,000 60 kWh

          1. kdawg says:

            I guess the real question is what’s the margin on each car?

  2. Mark H says:

    Good report. No negative spin, just the news. If you followed them closely, there really aren’t any big surprises here are they? Automotive start up of this scale is not going to be easy. They are going to have manufacturing issues, product issues, sales issues, distribution issues, media issues, thus resulting in stock issues. 2013 is gonna be a tough year. Maybe the same in 2014. Still, they have a great product. Not a perfect product, but one their customer base loves and the envy of most EV owners as well as many wanna be owners, myself included. I still hope to make the Model S my second EV. I am standing a safe distance from the track today for if you connected the dots of nothing more than what has been written on InsideEvs, you had to have seen this train coming…

    1. Jay Cole says:

      Yes, I don’t think there is many surpries over what we expected, but maybe some for the wider market.

      Truth be told, they have a really nice base, and good-sized order book in place to give them a real head-start on being successful, and planning their next move. Its a credit to Musk and his team to get to this point.

      Going forward, I think they have to look augmenting at their capital levels (while their cap is still high), and possibly re-structuring their business now to accomodate optimal profitability at a level of 8,000-10,000 cars in 2014…which I think is the level their ongoing bookings are telling them.

      No one who is looking to buy an EV probably wants to hear this, but Tesla should probably have a good look at not building the entry level car. The landscape has gotten much more competitive over the last 6 months, and competition is going to be fierce/margins low.

  3. Sam Horner says:

    Tesla 18650 batteries blow up like Fiskers when they get wet or overload- BAD THING

    No REAL car company only sells a few thousand cars after over a decade of trying to sell the product: BAD THING

    Most of the Tesla’s sold so far were bought by Musk’s friends or investors to help cook the books to create false demand: BAD THING

    The brand of Tesla has been destroyed by MUSK being such an arrogant, egotistical dick: BAD THING

    Each and ever car has come off the production line with problems: BAD THING

    Tesla paid off government officials to get their free “loan” from taxpayers: BAD THING

    TESLA: BAD THING

    1. Spin says:

      Don’t hold back, tell us how you really feel.

    2. Foo says:

      Do you have any evidence for any of these claims?

    3. Richard Joash Tan says:

      and Sam Horner doing all the negative things about Tesla = SUPER BAD THING!!!!

    4. Richard Joash Tan says:

      “Tesla 18650 batteries blow up like Fiskers when they get wet or overload- BAD THING”

      my response: Tesla did not blow up batteries.

      “No REAL car company only sells a few thousand cars after over a decade of trying to sell the product: BAD THING”

      my response: Model S sales have surpassed Volt sales in January

      “Most of the Tesla’s sold so far were bought by Musk’s friends or investors to help cook the books to create false demand: BAD THING”\

      my response: Tesla is cash flow positive

      “The brand of Tesla has been destroyed by MUSK being such an arrogant, egotistical dick: BAD THING”

      my response: the brand has a lot of good experience and the Model S has more awards

      “Each and ever car has come off the production line with problems: BAD THING”

      my response: Tesla Production has ramping up for quality checks

      “Tesla paid off government officials to get their free “loan” from taxpayers: BAD THING”

      my response: Mitt Romney, the republican that called Tesla a “loser” was lost to Obama, which he was reelected last November after Motor Trend named the Model S car of the year

      “TESLA: BAD THING

      my response: AND YOU ARE A BULLSHIT!!!

      1. James says:

        Controversy = GOOD THING!!!

        Sam Horner’s right of free speech = GOOD THING!!!

        Sam Horner’s assumptive blather = BAD THING!!!

        Sam Horner’s handle on fact = BAD THING!!!

        SAM HORNER = WILD THING with no real BASE ON THE FACTS.

        1. kdawg says:

          WILD THINGS = AWESOME MOVIE!!!

    5. Bonaire says:

      How old are you – 85? 15?

  4. Bloggin says:

    It seems to not matter much as to who reserved the car, but how many actually are purchased. And people are as emotional about car reservations as investors are with their investments.

    Canceling a reservation does not necessarily mean the person does not want the car, many could just want to spend the case on something else for now, or put it where it can earn interest while waiting for production to ramp up so they can buy when it’s available.

    And investors know a good thing, and don’t want to be on the wrong end of Tesla, when production really gets started and stock takes a spike. Their best bet is to grow some balls, strap on a cup and ride it out.

  5. Josh says:

    I think the stock price reaction is mostly because Tesla lost 17% more than was predicted. Overall there was no real scary news here. Seeing what their margins look like after 3 months of full production will be much more telling.

    The most worrisome item about this report was the lack of guidance for 2013. There has basically been nothing other than what was promised 2 years ago of 20k delivered with 25% gross margin. It is unclear if Tesla can expand the stores, service centers, and supercharger network all while turing a profit for 2013. It seems something has to give.

  6. Roy_H says:

    Production almost never matches expectations, something always comes up to throw a wrench into things. Q4 was never expected to be profitable, and the loss was more than expected. Musk has always pushed the limits, and this means spending the last dime to generate future sales. The supercharger network is expanding rapidly, how much does that cost? New stores, more expenses. If he was focused on providing high near term profits for investors, the easiest way would be to go slow on the expansion of stores and superchargers. When Tesla does turn a profit, it will be small because all extra money will go into more superchargers and designing/building the next products. Tesla is a bad investment for investors that expect short term profits, long term Tesla aims to be a much bigger company, then your shares will be worth more.

    I think that the 40kwhr model was a mistake and would encourage anyone with a reservation for one to upgrade to the next model. You will appreciate the knowledge that your battery pack will last longer, and when it does degrade in several years it will still have very useful range. It is an “entry level” model and if you look at almost any other manufacturers cars, the bottom version is just for advertising price, and in many cases none are actually sold with no options.

    1. Jay Cole says:

      I think Tesla did a intelligent thing by dropping the 40 kWh version for Europe.

      I don’t think they necessary need to be in the ‘low-end’ of the plug-in luxury market, and there margins are far superior in the 60kWh/85 kWh versions.

      1. Mark H says:

        I can understand that totally from a profit point of view for Tesla, but I totally do not get it from a practical point of view for the market. All studies show that 40 miles covers the bulk of most drivers needs. Furthermore I know the InsideEVs report would be three pages long if all of a sudden Nissan offered a 40kWh battery. It is really the 40kWh Model S that interest me the most. It would more than cover my day to day needs and with minimum charger support planning, I can make it to the beach or mountains or any place that I need to travel. $52K for a such a car really is not that unreasonable when compared to comparable Lexus and BMW models, not to mention the huge saving in fuel.

        1. Jay Cole says:

          I’d say like 5 pages long on the 40 kWh LEAF, (=

          1. Mark H says:

            That’s right. Just adding some perspective to the practicality of 40kWh battery. Even for Tesla, it is not compatible with the SuperCharger thus making it a different EV from the 85kWh Model S, but that doesn’t mean it still isn’t one sweet BEV.

            1. Josh says:

              One sweet BEV that Jay implies Tesla can’t make a profit on, and might end up putting them out of business. So they should delay/not build as many as possible.

              One takeaway is Tesla’s battery costs are far lower than $445kWh(85kWh upgrade) – $500/kWh(60 kWh upgrade), as the battery upgrades seem to be where they make their margins.

  7. James says:

    The 40Kwh Model S will still have no peers.

    This Model S will be timed perfectly for the installation of many
    new Superchargers – making the shorter range less of an issue.

    The 40kwh S can’t come soon enough.

    1. Jeff says:

      Except for the fact that the 40kWh Model S is incompatible with the Supercharger network. It’s essentially an “in town” car.

      No doubt Tesla has serious potential to combine efficiencies and earn a reputation as a real leader in the EV segment, but their success depends on a lot of unknowns at this point. Hopefully a profitable 2013 can give them enough of a cushion to innovate and strengthen their weaknesses. Keep in mind, now they’ll have a growing secondary market with aging and progressively weakening batteries to contend with– dealing with recycling, warranty, and creating a market for the reuse of these batteries is one of many issues they’ll have to face.

      It seems Elon can juggle pretty well, and this year will be a critical year to watch how Tesla copes with all the pressure. I wouldn’t bet against them.

      1. Mark H says:

        Not so much an “in town” but not a “coast-to-coast” car either. It will be used the same as all other BEVs on the market today (with a little more range) which just proves there is a market. More of a “daily commute” EV. The 85kWh stands alone as a long distance EV.

        I don’t think the secondary market for any EV batteries is going to be a problem. Several companies have looked into converting them to battery backup systems. As power incentives for pv systems diminish, a natural market will occur. I suspect that the lowering cost per kWh will make the resale value of the EV battery pretty low, but for the most part I think most EV adopters think more about the cost of a new battery opposed to what they can sell there 70-80% capacity used one. A reasonable percentage of EV owners have a grid tied pv system, myself included, and they very well may keep the battery for their own usage.

  8. GeorgeS says:

    If Tesla had more revenue than expected (306 million vs 294) but a bigger loss of 62cents / share versus 53 cents per share then what expenses were higher than they predicted. ??

    1. Jay Cole says:

      Hey George, the street expected 298, so they did an extra 8 million over forecast.

      Looking at the results, the main expense was the cost of production. Tesla really pulled every string they could to get results in Q4 of 2012, like having 25 mins of every hour for labor being of the more expensive, ‘overtime’ variety.

      Compounding the excess labor cost was the fact that it did not result in hitting the expected producton level for the quarter of 2,500 to 3,000. I think the street was looking for somewhere around 2,700 units, so the fixed overheads ate into the margins somewhat on a lower production volume.

      In truth, the automotive sales revenue was 294 (a little less than estimates). i think the earnings actually could have been worse, because I don’t think the street factored in the remaining Roadsters in inventory that were sold out in the quarter (which actually helped the botton line), and the fact Tesla received an additional $11.9 million booked in revenue in extra items (milestone payment from Mercedes).

      Taken as a single quarter, based on the hurdles and production level, the 62 cent loss was actually fairly decent, and I don’t think that is what is putting pressure on the shares, its the outlook.

  9. GeorgeS says:

    It’s all very complicated. All I know is that cents/share can be a misleading number. (especially in the case where a company is selling assets).

    If total revenue was higher but revenue from vehicle sales was lower what caused higher total revenue?

    1. Jay Cole says:

      11.9 million milestone payment from Mercedes, a few Roadster sales and I think I higher than expect $/Model S based on the trim level production (85 kWh/sig/perf..no standard susp)

      I really think the EPS miss is immaterial this quarter given the background. The factors to watch right now (imo) is current sales/demand, production, cash levels.

  10. John says:

    If anything I’d say the 85kWh demand is encouraging. I’m sure their margin is greater on cars going out the door with tech package, performance and the big battery. I have a 40kWh reservation, and there’s zero reason for me to upgrade to a bigger pack. My wife’s CT200h can take us on our road trips the 4 days per year we do that. The 40kWh is still almost as fast as my G37S, but has all the obvious benefits of a BEV. Too bad it’s delayed but I understand they need to make the higher margin cars first. At some point they will have to either deliver the 40’s or deliver a refund to the 10% of reservation holders patiently (or not so patiently) waiting for their cars. It would probably be a reasonable business decision to cancel them, although I hope they don’t. From my point of view the 40kWh with some nice options is the best deal. And Sam, go crawl under the rock you came from and try switching off the talk radio.

  11. Mike says:

    This company convinced customers to give them $294 million for their electric cars in four months. I find that impressive, no matter how much money they’re hemorrhaging.