Tesla’s Second Quarter Loss Expands. Balance Sheet, Future In Question

5 years ago by Jay Cole 7

Tesla CEO Elon Musk And His Great White Hope

For the second quarter of this year, Tesla Motors lost $105.6 million, or $1 a share, that is up from $58.9 million, or 60 cents a year earlier.  Tesla put the blame on the end of Roadster sales and the gap to full production of the Model S.

Tesla's Upcoming Model X

The adjusted loss of 89 cents a share, was narrower than the consensus estimate of a deficit of 94 cents, which compares to a adjusted loss of 53 cents a year earlier.  Tesla also re-confirmed production cuts for the Model S in Q3 from 1,000 to 500, and estimates for Q3 revenue have been lowered by analysts by over 40 million.

The California based startup does boast customers in Toyota and Daimler AG, and continues to insist it will not only still produce (and sell) 5,000 Model S cars it had earlier projected by year’s end, but also easy blow past 20,000 units sold in 2013.

“This accelerating pace of reservations makes us confident that demand will surpass 20,000 Model S units for full-year 2013 deliveries,” said Elon Musk in a statement.

Can Tesla Really Sell 20,000 Of These a Year?

Reservations for the Model S in the quarter increased to 11,500, and  to 12,200 shortly thereafter.

Curiously, the CEO on the company’s conference call stated that 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.

Looking at the company’s balance sheet we believe that Elon Musk’s version of ‘not’ the very immediate future must be a really small amount of time, as the company continues to burn cash almost as fast as the shareholder equity fades.

Equity remaining for shareholders stood at 62 million, that is down 91.6 million for the quarter, and working capital is down around 25 million from over 100 million three months earlier.   The money available in the bank is way to low for any kind of mass producer of automobiles to be successful, and with over 700 million in liabilities, this company needs an infusion of money in the worst way.

With next to no cars being produced for this quarter, and a question of how much money Tesla can actually make on the 4,500 cars they think they can build in the fourth quarter, their future is anything but certain, and their $3 billion market cap could easily be obliterated over the coming months.  For this reason, we believe despite what Tesla says, the company will shortly be tapping its resources to convert cash onto its balance sheet in short order.  It has to do it to ensure its future.

Past the central question if Tesla can be profitable at all selling the Model S (they lost hundreds of millions on the Roadster), how can Tesla be confident of selling 20,000 Model S pure electric vehicles next year, considering the entire industry combined won’t hit that level this year?

One thing is for sure, many uncertainties are still ahead.   In light of Tesla’s leadership status in the EV industry, we hope the company can somehow pull through this tough time.

Tesla shares fell yesterday to a close of $28.95, down over $7 from 10 days earlier when it closed at $35.95.

 

 

(Real time share price can be found here  — Tesla letter to shareholders and financial results can be found here)

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7 responses to "Tesla’s Second Quarter Loss Expands. Balance Sheet, Future In Question"

  1. TAP says:

    I don’t play the market much (I’m a buy-and-hold indexer) but if I was, I would be short selling Tesla.

  2. Stuart22 says:

    I would think Tesla would be a good candidate for a government ‘bailout’ – they’ve got fabulous, world-class products on the verge of hitting the market and bringing back returns on any investments made in the company. Their vision as a company is cutting edge in an industry that is on the verge of a major shift from one energy source to another.

    This country needs the Teslas to keep the big companies looking forward to the future instead of hanging onto the past. Tesla must survive and be allowed to prosper – they have been the true halo of hope for all who believe in EVs.

    1. Jay Cole says:

      Technically, they are receiving assistance of sorts.

      I didn’t add this into the article but Tesla did drew down $71 million from our DoE loan facility in Q2, and have $33 million left to tap…of which they say they are “on track to draw all remaining funds in the next few months.”

      The company is not in any real short term danger, as it has places (like itself) to raise capital. However, as many ‘green’ companies are finding out, when you move from just forcasting great things and profits on paper, to actually making something, reality can move in on you estimates of greatness pretty fast…and that can wipeout your book value pretty quick. Which can then lead to all kinds of other problems raising capital, and meeting your liability obligations. Ask A123 about that one, (=

  3. Josh says:

    Jay,

    From this information in your article, it sounds like you listened to the Q&A with Elon and company. They seemed like they clearly addressed the liquidity and capital needs assuring that they were in good shape. Maybe I am being too optimistic.

    As far as demand, they seem almost giddy. It sounds like they are planning on selling 30k next year not 20k. I think Elon said three times to hold him to the 20k and 25% gross margin numbers for 2013. That would mean $375 million in profit from Model S in 2013 (using $75k average sales price).

    I am not a stock analyst, but that sounds like a pretty good year to me.

    1. Jay Cole says:

      Tesla ala Elon Musk is a really likeable guy/company, and you really want to root for them…i know I do, but sometimes you have to step back a bit.

      No secret the automotive margin is crappy right now (9%-ish), and they hope to improve it in 2013, however, Tesla is ONLY delivering the highest margin of those cars right now…the signature performance, followed by the next highest (85 kW) this quarter, then the next highest cars (60 kWH) in the last quarter, meaning all the entry/low margin cars are left on the back end.

      Is Tesla worth 3 billion on a chance to sell 20,000 cars is the question. Is it reasonable that this California start up can get such value, and as you say $375 million in profit out of 20K cars with all those debts, overheads, employees etc.

      GM and Toyota will sell 7-8 million cars in 2013. 350 times what Tesla will. How ridiculous would it be to suggest they would make $131,250,000,000 next year, while retaining a debt load of 260 billion? Yet Tesla is claiming that level of success will be achieved in its first year of full production…on pure electrics no less, while everyone else is claiming/admitting they are not making any money on them yet, just spending to get a foothold.

      Tesla has a interest in self-promotion right now, they have to monetize the company, and soon. (imo)

      …I want to believe, I’m a huge pro-EV kinda of guy, but I don’t believe. I just can’t objectively do it In this case, they have to ‘show me the money’ first.

      I’d be delighted for them to just show a profit of $1 for 2013…forget the hundreds of millions.

      1. Josh says:

        Jay,

        Thanks for the response.

        Quick clarification on my numbers, the $375 million was just gross profit from Model S if they can average 25% profit over the costs of building them. This does not take into account any of their costs of selling the Model S and company overhead. They will make a little money on drivetrains and engineering services, but as a company in 2013, I do no think they will get anywhere close to $375 million in profit. Cut that in half would be a best case scenario.

        The skepticism is definitely deserved. Tesla did not have a flawless rollout of the Roadster when it came out, but maybe they have learned since then. I think Elon docking at the ISS might be easier than executing a flawless ramp-up of Model S.

        That said, I am rooting for them the whole way. The EV industry needs Tesla pushing the limits and pulling the big guys along.

        1. Jay Cole says:

          I’m with you, really pulling for them. The world needs a success story like theirs could potentially be.