Wednesday night after the close of business, Tesla reported earnings for the second quarter of 2015 that beat the street, but some waffling on earlier Model S delivery expectations has sent the stock solidly lower.
Tesla Model S Sales Expectations Get Ratcheted Down By CEO Elon Musk
Revenue for the quarter came in slightly above the street estimates of $1.18 billion, at $1.2 billion ($955 million GAAP thanks to lease accounting) - which is up 40% from a year ago.
Earnings were off an adjusted 48 cents/$61 million - the market was expecting a loss of 60 cents (GAAP: -$1.45/$184 million).
"As expected, the average selling price of Model S declined during the quarter due to a product mix shift away from P85D. Q2 Automotive revenue included $27 million of total regulatory credit revenue, of which $14 million came from the sale of ZEV credits"
Tesla expects to sell more credits in Q3 than Q2 - about $45 million worth, with $30 million of those being of the ZEV variety. Tesla also sold $32 million worth of powertrains to Daimler for their Mercedes-Benz B-Class ED.
Gross automotive margin also dipped in Q2 (23.4%) on the lower selling price of the average Model S, higher manufacturing costs of the company's "small drive unit", and deffering revenue recognition for those upcoming Autopilot features the CEO tweeted about last week.
Tesla also slightly revised up their earlier estimate for 2nd quarter sales of the Model, from 11,507 to 11,523.
From conference call: Tesla CFO Ahuja says Tesla will be "certainly" cash-flow positive positive in the first quarter of 2016.
Tesla Guides Q3 Sales To 11,500 Units - Roughly Equal To Q2
Production of the Model S was also higher than expected in the 2nd quarter as 12,807, but as we have been pounding the table about the last few months on our sales scorecard, Q3 will see Tesla just not be able to produce enough cars - and there just isn't enough time in Q4 to catch up.
The full year forecast of 55,000 looks like it won't happen as the CEO took estimates down by as much as 5,000 units. This is a significant development as Mr. Musk was very confident about the sales level earlier in the year.
"We are now targeting deliveries of between 50,000 and 55,000 Model S and Model X cars in 2015. While our equipment installation and final testing of Model X is going well, there are many dependencies that could influence our Q4 production and deliveries.
We are still testing the ability of many suppliers to deliver high quality production parts in quantities sufficient to meet our planned production ramp. Since production ramps rapidly late in Q4, a one-week push out of this ramp due to an issue at even a single supplier could reduce Model X production by approximately 800 units for the quarter. Furthermore, since Model S and Model X are produced on the same general assembly line, Model X production challenges could slow Model S production. Simply put, in a choice between a great product or hitting quarterly numbers, we will take the former. To build longterm value, our first priority always has been, and still is, to deliver great cars."
Given all the unknown factors with the upcoming Model S, it may yet still be tough for Tesla to close in on 50,000 for the full year, and we would not be surprised to see an end result of about 48,000 units delivered in 2015.
For the third quarter Tesla guided to sell about 11,500 more Model S sedan.
From the conference call: Mr. Musk really doesn't seem to eager to talk about 2015 projections, doesn't want to give any hard estimate numbers after pulling back on the 55k figure.
Tesla Model X Still Headed For September Release "In Small Numbers"
Tesla reports that the Model X is still on track for late deliveries in the third quarter.
For the first time we also heard an estimate of sorts on the September deliveries, with CEO Musk noting there would be "a small number of Model X deliveries".
No full year/Q4 estimates were given, just that it would be a busy quarter for the company.
"In addition, the timing of the Model X production ramp and high total deliveries in Q4 create operational challenges for our delivery organization towards the end of the year. This adds complexity in predicting our delivery rate with precision."
As for the current Model X ramp-up, Tesla says they are now building validation vehicles and "executing final engineering and testing work".
Mr. Musk also adds that, "We have been producing release candidate Model X bodies in our new body shop equipped with more than 500 robots as we fine-tune and validate our production processes."
No word yet on pricing.
From the conference call: Specific confirmation on Model X deliveries from Mr. Musk, "We expect 1st deliveries of Model X at the end of next month". Musk later calls the X "maybe the hardest car in the world to build".
Model X online configurator expected to go live in two to three weeks.
Tesla Started A $1,000 Referral Program For Customers In Q3 (details)
2016 Model S and X Demand Projections
"Looking ahead to next year, we are highly confident of a steady state production and demand of 1,600 to 1,800 vehicles per week combined for Model S and Model X."
So if you are looking for a 2016 sales estimate, the company looks to be guiding between 83,000 to 94,000.
The company says that demand for the Model S picked up right across the board in the 2nd quarter (based on a year prior's numbers) with the US up 30%, Europe up 50% and China (which was a disaster in 2014) "nearly doubling".
Used Model S Program
"We launched our pre-owned program in North America in Q2 and recognized revenue of $20 million from the sale of such cars.
These cars are trade-ins received from customers who upgraded to the latest Model S vehicles. Pre-owned sales activities are driven by the listing of available inventory on our website, and thus have folded smoothly into our existing sales process. Our pre-owned program benefits both the original owner and the buyer of the used Model S."
From the conference call: Tesla says program is going very well, is "very capital efficient", and they are selling cars much faster than they can acquire them.
Tesla Energy Powerwall Product
Tesla Energy/Gigafactory Update
"We are on track to start production of Tesla Energy products this quarter at our Fremont factory, with a plan to ramp up production in Q4. As a result, we expect Q3 services and other revenue to grow modestly and gross margin to be comparable to Q2.
We expect to further expand Tesla Energy battery module and pack production at the Gigafactory in Q1 2016 on a more automated line, where construction remains on plan."
From the conference call: Total reservations now north of $1 billion - with an emphasis that company has done no marketing or advertising. As for forward revenues, Tesla expects up to $50 million to be added in Q4, maybe $400-$500 million in Q1 2016.
Despite high initial orders on the small application/personal Powerwall products (7kWh/10kWh), the company expects most future demand will ultimately come from utilities and the Powerpack (100 kWh).
Gigafactory: first equipment will start to arrive before year's end
Shares were off as much as $25 in early after-hours trading, and sank further Thursday morning - as of press they were off $31 or about 11.5%. A real-time quote can be found here. Tesla Q2 Report/Shareholder PDF can be found here.