Tesla Slashes Revenue Outlook Again, Looks To Raise More Money. DoE Loan Issues

5 years ago by Jay Cole 6

Tesla CEO Elon Musk Not Having His Best Day Ever At Tesla

Tesla has suffered a fairly serious setback today as the company announced that it cut its revenue forecast for 2012 because of a slow rollout of its Model S sedan.  Shares closed down 10% on the news. (real-time quote)

(UPDATE ADDED: Sept 28)

It is not like we told you months ago this was going to happen; but we totally did.

If Only We Could Produce These As Fast As We Thought

Production updates for this quarter had come often from the company, but the numbers did not match up to Tesla’s own lower guidance of 500 Model S deliveries by quarter’s end, (down from 1,000 earlier) and 5,000 total units by year’s end.

The company said in a 8-K SEC filing that it expects 2012 revenue in the range of $400 million to $440 million, down from its prior outlook of $560 million to $600 million.

The company is expected to deliver only about 225 Model S cars this quarter, and simple math would suggest they expect to now sell (at most) 3,000 Model S electric cars by year’s end.

We commenced production of our Model S in June 2012. We continue to ramp production of Model S at the Tesla Factory with the goal of producing the world’s finest automobile. The Model S is an all new vehicle which we are producing with new employees using new equipment. As our main focus is on quality, we have methodically increased our Model S production at a rate slower than we had earlier anticipated.” – Tesla’s 8-K statement on Model S Production

Tesla put the bulk of the blame on supplier and quality control issues.

A level of 5,000 Model S vehicles produced per quarter is seen as the level at which the company achieves enough margins to be profitable.  Now, the worry is that Tesla will not be able to ramp up to this level until the company is almost through its pre-order reservation list which totals over 13,000; meaning it then has to prove its viability from ongoing demand, which at 5,000/quarter…seems like a hard bridge to cross.

Tesla, while stating that the reservations had increased by 1,500 since June also noted that cancellations rose in the third quarter as the company asked the first several thousand  reservists to firm up, and configure their car for delivery.  For the quarter, after cancellations, Tesla expects the net reservations/orders to increase by about 1,600.

Basically, the company needs to sell 5,000 every quarter to make 5,000 every quarter going forward, and they only ‘sold’ 1,600 new Model S sedans in Q3.

Happer Times: Tesla CEO Unveils Supercharger...Last Night

Additionally, as we reported two months ago after listening to the company’s quarterly conference call, Elon Musk said Tesla may consider raising equity at some point “to provide a cushion” and help fund vehicle development, but it won’t do so in the very immediate future. 

At the time, we questioned how short of a time from the “very immediate future” was for Mr. Musk, as cash seemed to be fading fast at the company.

Unsurprisingly, Tesla also filed another form today (424B5) saying the company would be selling an additional 4,344,930 shares worth $128 million, with the company granting the underwriter a 30-day option to purchase up to an additional 651,740 shares of common stock, bringing the potential raising to about $150 million.

The CEO also says he has preliminary interest to pick up another 33,311.

UPDATE:  Tesla said in a regulatory filing today that it now expects to sell 6.93 million shares @ $28.25 each, which is an increase of 2.58 million from what it reported on Tuesday.   Tesla expects to receive net proceeds of $192.7 million, or $221.6 million if the underwriter, Goldman Sachs Group Inc. picks up its option

Tesla states that without raising this capital, it may be in violation of its loan agreement with the U.S. Energy Department when it comes to payments in 2013, and as such it will need to be amended.

“We currently anticipate that without raising capital in addition to this offering, we would need to seek an amendment from the DOE to modify the total liabilities to stockholder equity covenant for the quarter ending March 31, 2014″

Jess Evanson, a Tesla spokesperson said that the company “expects to be close to free cash flow break-even at the end of 2012’s fourth quarter.”  Not exactly a ringing endorsement for the future.

Building electric cars from scratch is hard.

 

Tesla SEC filings

Tags: , , , , , ,

6 responses to "Tesla Slashes Revenue Outlook Again, Looks To Raise More Money. DoE Loan Issues"

  1. MrEnergyCzar says:

    Well, we knew they were doing 80 units per week but had to average 400 per week until years end…. ramping up is one of many reasons most new car companies the last 100 years failed… I just hope China doesn’t buy them, can’t rule out Toyota though…

    MrEnergyCzar

    (MOD EDIT: Not sure why this got roped into moderation, sorry about that..maybe it was the word China, lol)

  2. Lensman says:

    I think the writer has made an error, first saying Tesla Motors planned to sell 5000 of its Model S per quarter (which would indeed match the 20,000 per year that is the minimum Tesla Motors says it plans to make next year, possibly as many as 30,000), and then incorrectly saying 5000 per month. But that aside…

    Is it really believable to say that TM will have a hard time finding a market for 5000 of its luxury sedans per quarter, when the car has gotten almost universal rave reviews? When some car reviewers are calling it “The best car in the world”?

    BMW and Lexus’s best selling luxury sedan models have sales of over 5000 per month. So if TM can’t sell 5000 or 7500 per quarter of one single model, then something is very wrong somewhere!

    1. Jay Cole says:

      Yes, should have read 5,000 per quarter in that line of text.

      /fixed…thanks for the heads up

      I think the fact Tesla disclosed in their 8-K that they expect to book 1,600 new net reservations this quarter (after cancellations) brings a lot of skepticism that ongoing demand can be 5,000 quarter.

      I believe the real concern with the company is you have to look at the quality of the pre-orders going into 2013. The company is banking on a volume of 20,000 and an automotive margin of around 20-25%

      Problem is, while struggling to maintain cash, satisfy the DoE and raise more capital. To that end, Tesla is only producing the highest (of the high) margin cars from their reservation list now, the 85 kWh Model S (specifically the Signature/performance first for the most part). Their average transaction price is right around $100,000. They are essentially stealing from their future profitability.

      This leaves the bulk of ongoing orders from reservations into 2013 as 40 kWh ($57,400) and 60 kWh ($67,400) for 2013. Not 20-25%

      Guesstimate/example of production demos:
      Q4 – 2,500-85 kWh, 500-60 kWh (including 1,000 signatures at about 100K)
      Q1 – 3,000 40 kWh, 1,500 65 kWh, 500 85 kWh

      Without a big influx of new orders (and with a bias to the high end models) to balance the production, the backend of their reservation list is a nightmare scenario.

      Its great they have the initial reservation list to be able to fully utilize production for 6 months, but it is a real problem if they end up with little to no margin on the cars they do build. So its a catch 22.

      1. Lensman says:

        Mr. Cole:

        Thank you for taking the time to respond in detail. Your in-depth analysis is appreciated. It looks like the uphill climb for Tesla Motors is even steeper than I realized, but I’m still going to root for them to succeed.

        1. Jay Cole says:

          I am in with you Lensman. Tesla really is the flag-bearer for plug-in cars, the whole industry benefits from their (high profile) existence…plus they just make cool EVs, which is something we don’t have a heck of a lot of.

  3. Delta says:

    Why doesn’t Apple invest in Tesla? They could toss them a couple hundred million from one weeks profits. This would be a cool partnership of Californian ingenuity and generate a whole lot of media buzz.