Tesla Q2 2015 Earnings Beat Estimates, But Model S Delivery Estimates Knocked-Down

Tesla

AUG 5 2015 BY JAY COLE 69

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

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.

Model S

Tesla Guides Q3 Sales To 11,500 Units - Roughly Equal To Q2

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.

Model X

Tesla Model X Still Headed For September Release "In Small Numbers"

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

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 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.

 

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69 Comments on "Tesla Q2 2015 Earnings Beat Estimates, But Model S Delivery Estimates Knocked-Down"

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ModernMarvelFan

I am just waiting for the fight between Tesla naysayers and defenders to fill up the next 50 comments…

Just_Chris

+1

I don’t know if I can even look. I think I am just going to go and read the 50 or so comments on the A3 article where everyone agrees the the volt is better than the A3 because it has more EV range except for 1 or 2 hardy soles who suggest that perhaps there is room in the PHEV market for more than the volt.

Tesla is lowering expectations on the number of vehicles delivered in 2015 from 55K to 50-55K.

On the flip side, they forecast that 2016 will have a steady-state demand and production of roughly 1,600-1,800 vehicles (S & X) per week. Thats between 80,000 and 83,000 vehicles per year, depending on how many production weeks they have (48 or 50). So their rough 50% per year increase is still on track.

I wonder about 2017. I don’t see an easy way to 50% vehicle sales growth. At some point they’re no longer demand constrained, and I think that comes at the end of 2016. It may be that the 50% growth expectations are back-filled not on the vehicle side, but on the Tesla Energy side. So while Tesla revenues may grow 50% YoY, vehicle sales may increase a smaller amount with energy storage picking up the rest as more phases of the GF come online.

After 2017 with the ramp of the Model 3, it should be easy to resume their 50% annual growth rate for many years after that.

Someone out there

You make a good point. Tesla really need to deliver the model 3 on time. They have been picking the low hanging fruit for quite some time now, they really need to expand their product line soon.

Ryan

All they really have to do is start taking Model 3 reservations on-time and $5,000 deposits… that should add a decent amount of cash to the bank with 100,000 reservations 😉 but seriously, please be on time, I want one!

Brian

The MX will take the demand into the 2017 Model 3 release season. Even if you ordered a MX right now I wouldnt expect to see delivery until later in the summer next year.

Mikael

Tesla are probably staying slightly under 50%. 2014 – 33k, 2015 – 48k, 2016 – 70k, 2017 – 100k…

Then 2018 might be a great year or a poor year depending on the Model 3. It might not be in production yet, or in small scale production in the latter part of the year.

Ziv

If you are right, none of the Tesla III buyers will get the full tax credit, and it may end up that only the very first III buyers will get the 1/4 credit in the amount of $1875.
200,000 cars, then full credit to then end of the next quarter, then two quarters at half the original credit, then two quarters at quarter credit.
Your numbers would have Tesla hitting 200,000 in the late summer or fall of 2017 and the credit getting cut in half early in 2018. Right about when the III would be showing up.
Gaming the date of the 200,000th delivery is definiteley worth doing.

Well, those are worldwide sales, not US sales. But Tesla did say the $35k price was not accounting for the tax credit, because they didn’t think they would still be eligible for Model 3.

Ziv

You are right about the difference between US sales and world sales. I really haven’t run the numbers for US sales estimates from Tesla.
In the US they sold 2650 in ’12, 17,650 in ’13, 17,300 in ’14 and they have sold 13,200 up through July with a nice rise in amount of sales most quarters. So they may end up selling 26,000 this year in the US bringing their total to 63,600, plus whatever Roadsters they sold domestically probably brings that just above 65,000 by the end of this year.
Add 50k next year? And 75k in 2017?
So maybe they will have some sales of III’s that get the credit.
Which kind of makes it clear that maybe the credit should go away in 2019 or 2020. Why support the carmakers that are getting into the game late. Tesla, Nissan, GM and even Ford deserve their cars getting the credit. I am not so sure I want to see the money going to Fiat.

Ambulator

First quarter earnings -$1.22, second -$1.45. It’s not a good trend.

Londo Bell

Burned another $460m cash. $1.15B remaining. Good for another 2+ quarter at the current rate. Tesla will need to find new investors, FAST (that line of credit = loan will only extend it a bit longer).

Ambulator

Cash is fairly unimportant. They need capital expenditures to grow. Losses make it hard to borrow the cash, especially on good terms.

Robb Stark

Non-Sense

Again, Deepak and Elon stated they may be cash flow positive in Q4 but definitely by Q1 2016.

BTW Jay Tesla China was not a disaster in 2014. Guided for 5k-10k deliveries and delivered 4200.

Below guidance but far from “disaster.”

Three Electrics

With -$2B in retained earnings, they’ve lost $20K per Model S sold to date.

Tech01x

Gobblygook. Tesla has spent billions on infrastructure that should be amortized over far more than the Model S vehicles built so far. The Fremont factory, the Gigafactory, the service centers and the galleries are geared to build, sell, and service many more Tesla vehicles. Therefore, your assertion is complete nonsense.

ClifJ

It’s not gobbledegook. Less than $200M of the negative retained earnings is due to capex. Capital expense does NOT go to the bottom line! The expenditures show up in assets that are then depreciated/amortized; that depreciation takes place over years. You might say a significant portion of the retained losses don’t really “count” because they are stock option compensation; I would agree. But you junior accountants need to clean up your erroneous understanding of capital expenditure.

jelloslug

If it were only that simple…..

Pushmi-Pullyu

Three Electrics said:

“With -$2B in retained earnings, they’ve lost $20K per Model S sold to date.”

You seem to be suggesting that if Tesla sold more Model S’s, it would be losing more money. That is completely and totally untrue; Tesla has made an overall gross profit of about 25% on each Model S (according to the above article, that was lowered a bit to 23.4% in the last quarter.)

So, “Three Electrics”, at best your statement here is irrelevant juxtaposition of unrelated facts; at worst, it’s outright FUD.

The reason Tesla’s balance sheet shows negative cash flow isn’t because they’re “losing” money; nothing has been lost. They’re investing money in building out the Gigafactory and other capital investments. Despite what some investors may claim, investing in growing the company isn’t “losing” money, so long as that investment ultimately pays off. Prudent investment isn’t a “loss” at all, and characterizing it that way is intellectually dishonest.

JakeY

Interesting that they are deferring revenue for autopilot. There’s a lot of talk over at the TMC forums about possibility of canceling the feature, so I guess Tesla has taken into account of that.

Brian

If they canceled the program I can see them getting a huge stink with buyers. A bunch of people ordered new cars for autopilot function that was pretty much put into its own upgrade early on.

JakeY

I don’t see it likely being cancelled either (that would be worse case scenario), but it may be delivered so late or will less features that Tesla may have to pay customers back for that.

Elon just said on the conference call that the autopilot software will be rolled out to early access subscribers on August 15. One to two months later, if all goes well, for wide release.

sven

Under GAAP, Tesla must defer revenue on autopilot because GAAP doesn’t allow them recognize the money they received for the autopilot feature as revenue until the product/feature is actually delivered (sale completed). This is the same accounting principle that requires Tesla to treat the deposits it has received for Model S/X reservations as deferred revenue until the vehicle is actually delivered (sale completed).

I think that by the time the next conference call happens (first week of November), Tesla will know exactly what it will deliver for the year (since all the parts needed to actually build those cars will be in process) and they’ll know whether or not they hit 50K units, or miss it if they struggle with the Model X ramp.

Pushmi-Pullyu

So, in the 2nd quarter report, Tesla knocks down its production guidance for the year by about 10%. Isn’t that the same thing that happened last year?

Disappointing, but I guess I can console myself with the fact that Tesla continues to grow much faster than any other manufacturer of highway-capable cars, or at least any outside China.

Mikael

You have to tell Volkswagen that you expect them to grow by 50% or more by next year. 😉

What is really another few million sales? 😛

sven

To be fair, you should really be looking at the increase/decrease in market share percentage. Tesla could increase sales but lose market share if the total auto market grew by a larger percentage rate than Tesla’s sales percentage increase.

Pushmi-Pullyu

I don’t at all agree that’s “fair”. The question is whether or not Tesla will continue to grow at a much faster rate than any other auto maker (or at least any outside China), and how long it can sustain that growth. 10 years of 50% growth would put Tesla’s sales volume equal to Ford’s! That’s true regardless of the mostly minor fluctuations in the overall auto market we’ve seen over the past few decades.

Of course, it’s not really a 50% growth rate. Last year it was a bit less, and it looks like it will be less this year too. Still, if Tesla can maintain even a 40% growth rate, it won’t be playing in the Little League of auto makers for many more years!

sven

Using percentages for very small production numbers can be misleading. For instance, a small automaker that increases sales from 100 to 500 per year has a 400% sales growth rate. A large automaker that increases sales from 1,000,000 to 1,500,000 has only a 50% sales growth rate. Which company had more impressive sales growth, the small automaker or the large automaker?

Pushmi-Pullyu

You have a point.

But are any of the other small auto makers growing at sustained pace of 40% a year or better? Porsche, Bugatti, Ferrari? How about Maserati or Aston Martin or Lotus? Lamborghini, Pagani, or Shelby Super Cars? Rolls-Royce? …Bueller?

Nope, not a one. Perhaps some in China grow that fast or even faster, but not sustained growth; they disappear just as fast. Tesla Motors is the only small auto maker which seems to have the potential to move up to the Big Leagues of automobile manufacturing.

Now, that doesn’t mean it’s realistic to think Tesla will grow to the size of the Ford Motor Co. selling nothing but Models S, X, variants on the ≡, and maybe a new version of the Roadster. They’ll need to add major lines of different types of passenger vehicles; maybe a pickup, maybe a more downscale SUV/CUV than the X, and maybe more than one type of sedan: Honda has the Accord, but also the Civic, and both are good sellers. Perhaps Tesla will do the same.

ffbj

Well only 15 comments not 50. Oddly those are numbers I hate as over the air 15 sounds a lot like 50 as 16 is sometimes mistaken for 60. Anyway no big thing. I am not going to go all Henny Penny because Tesla missed a number.

Andrew

I think it’s important to note that according to the conference call, the potential slowdown in deliveries is not due to lack of demand, it’s due X and S sharing the same final assembly lines and, if X ramp goes slower than ideal, it drags down S throughput with it.

This is a temporary issue that does not reflect sagging demand for Tesla’s products, in my opinion, and will clearly be resolved by early 2016 as the X ramp completes and focus turns to 3.

Mikael

Hmm… even though there is one line for the S and one line for the combined S/X.

And both have 1000 per week capacity. Something smells funny.
Oh well, at least it’s kind of funny to see their over estimates in everything from production to demand to launch times of different projects.

We should have some kind of site interactive betting on Tesla (and other EV manufacturers if something interesting comes along).

Pushmi-Pullyu

Mikael said:

“Hmm… even though there is one line for the S and one line for the combined S/X.”

No.

Some parts of the formerly single production line have been doubled, both to increase throughput on the slow parts of the line, and also to enable Model X production where that requires different machines or a different setup from the Model S.

Other parts of the line remain single. Many of the robotic arms on the assembly line are perfectly capable of handling both Model S and X production, switching from one to the other without any delay or any need for reprogramming.

Saying there are two separate production lines is an overstatement.

sven

“. . . the potential slowdown in deliveries is not due to lack of demand. . . .”

If it’s due to a failure to execute, then that is not good either.

Robb Stark

Failure to execute at 100% is not perfect but executing at 90% of very high standards is still pretty good.

Pushmi-Pullyu
sven said: “[quote]…the potential slowdown in deliveries is not due to lack of demand…[unquote] “If it’s due to a failure to execute, then that is not good either.” The slowdown in production as they put the Model X into production doesn’t bother me. Legacy auto makers also have to take their production line offline for a few weeks when they switch over from one model year to another, despite having a lot more experience. What concerns me is that Tesla seems to keep being taken by surprise by this. Last year it was “Well, we planned for a two-week shutdown to speed up maximum production, but that turned into four weeks.” This year, they are again having to lower the production guidance they gave at the beginning of the year, apparently because of difficulties in getting the Model X into production. At some point, it’s fair to say “You should have learned by now that upgrading production takes longer than original estimates, and allow for that in your guidance.” Of course, I realize this makes me an “armchair general”. It’s easy to sit back and criticize when I have the benefit of hindsight which they didn’t have when they made… Read more »
sven
Pushmi-Pullyu said: “The slowdown in production as they put the Model X into production doesn’t bother me. Legacy auto makers also have to take their production line offline for a few weeks when they switch over from one model year to another, despite having a lot more experience.” If Tesla has to take a production line offline for a few weeks to switch over model years, then Tesla’s production engineering is NOT state of the art. Toyota’s production engineering, for example, has advanced to the point of it taking no more than couple of days for a model-year switchover. Time is money. A few weeks time difference in switching over models years significantly affects the bottom line, and is part of what separates profitable automakers from unprofitable automakers. “Production engineering is the under reported, but über-important element of the car business. It is where Toyota excelled, and it is where Toyota will excel even more.” “At the heart of TPS 2.0 is a trim and nimble factory, downsized to around 200,000 units per year, but capable of making eight or more models at the same time on the same line. That factory looks pretty much like Toyota’s Miyagi plant .… Read more »
Pushmi-Pullyu

Well, here’s a quote for you, sven:

“Historically, the summer shutdown was used by the automakers to complete the annual model changeover. Over the last 20 years, the two-week shutdown evolved, allowing the domestic auto industry to support maintenance operations and enabling employees to use their vacation weeks without interrupting overall productivity.”

http://www.reliableplant.com/Read/25135/GM-plants-summer-shutdown

Toyota is moving to a two-day shutdown? Even if that’s true, not just hype, that doesn’t necessarily mean it’s a good business strategy.

wavelet

Interesting…
I hope they end up being overly pessimistic on the total 2016 sales. If they can do it, reaching 100K EVs from a single manufacturer is a very significant milestone, esp. just a 2-model mix, esp. pure BEVs.

OB1

Elon left open the option of possibly competing with uber. A million mile drive train and totally autonomous…

ClifJ

The “million mile drive train” is far from certain. Presently Tesla’s warranty expense is significant and shows no signs of slowing. We’ll need the next 10Q to see warranty spend details but based on expense to date (leaving out Roadster years), the MX has consumed more than 8.5 cents/mile of warranty fix thus far. A million miles doesn’t look likely to me. Still needs reliability improvement.

sven

I think you meant to say the MS, not MX.

Nonetheless, the cent/mile of warranty fix cost is a VERY interesting/informative metric.

Clif J

Thanks for the correction! Like all market watchers I have X on my mind.

Matt
DonC

I think the bigger issue is the margins. Given that the margins dropped because of the mix of Model S sales, seems like the margins are quite sensitive to the selling price. Given that Tesla’s gross margin is 23% on a $100K car, and given that this margin is not sufficient to have the company be profitable overall, it’s hard to see how Tesla produces a $35K car, much less a $35K car with a positive margin.

Pushmi-Pullyu

Tesla is a profitable company. Spending money faster than they’re making it to build the Gigafactory doesn’t mean it’s an “unprofitable” company; it just means Tesla is investing a lot in future growth.

Those who call Tesla “unprofitable” are just as wrong-headed as those who have called Amazon.com “unprofitable” for many years, and for precisely the same reason: Both companies are investing in future growth instead of giving dividends to stockholders.

tftf

Please recheck what they spent on the Gigafactory so far, it’s next to nothing compared to their total cash burn in 2015.

That’s the scary part.

It’s all in their SEC filings. Will be interesting to see the next 10-Q.

tftf

From the last 10-Q (new one not published yet):

We acquired land for the site of our Gigafactory and have incurred $146.2 million of construction costs as of March 31, 2015.

Pushmi-Pullyu

You’re right; Tesla’s current spending rate on the Gigafactory is only a small part of the “cash burn”. That doesn’t refute my main point, though.

Here’s an article that provides an overview of what Tesla is spending all that money on, and it’s all due to growing the company:

http://www.bloomberg.com/news/articles/2015-02-12/why-elon-musk-is-about-to-spend-a-staggering-amount-of-money

sven
Pushmi-Pullyu, Spending money on building the Gigafactory =/= a current year expense that reduces net profit. Just because Tesla spent a lot of money this year to build the Gigafactory, does NOT mean that Tesla can list the vast majority of the money spent as an expense on its Income Statement in the current year. The cost to build the Gigafactory is spread out over 40 years as a depreciation expense on the Income Statement. In other words, the amount spent building the Gigafactory is not expensed in the current year, but is instead capitalized: turned into an asset and placed on the balance sheet and depreciated (expensed) over its useful life (40 yrs). Keep in mind that only a very small portion (1/40th) of the money that Telsa spends this year on the Gigafactory actually shows up as an expense on the current year’s Income Statement where net income/loss is calculated. Capital expenditures to design and build the a factory are depreciated/amortized straight-line over 40 years (could be 30 years, not sure), the factory’s useful life. The total cost of the plant is listed as an asset on the Balance Sheet, and a yearly depreciation expense (1/40th of plant… Read more »
tftf

Call me a permabear but they had another huge cash-burn. That was worse than the lowered guidance.

Tesla will need to do a giant capital raise in the coming months imho.

Cash was at close to $2bn in Dec 2014, now at $1.1bn.

In particular, the heavy investments for the Giggafactory will only start in 2016 (just an empty giant steel hull at the moment).

The GF might only be a shell now, but I would expect that Tesla has had to cough up some money for equipment in advance. If they came to me and said they wanted to buy machines for 10GWh/yr of capacity for delivery in 2016, you can be damn sure I’m asking for some sort of up front payment to invest in the tooling and staff needed to ramp to that capacity just to make the machines to make the batteries.

tftf

I posted the construction costs above, very little was spent so far (which also makes sense looking at the construction site pictures).

Tesla will needto spend $1-2 billion over the coming years for the GF. They don’t have have this money, see balanace sheet.

They will need to do a huge capital raise in late 2015 or 2016 imho.

pjwood1

The last 2bb cap raise, using convertible bonds, cost them 25bps since the stock never reached the conversion price. 25 bips may not last, but how many cap raises can Tesla do if their cap cost is under 1%?

I don’t think Tesla will have a tough time raising capital. S&P dinged their (effective) single-model risk. As TeslaEnergy, they can demonstrate not just model diversity (MX), but also sector diversity.

Estimates for stationary storage revenues would be interesting to review. This week’s Clean Power Plan, by dropping efficiencies and new nuclear, gave additional boost to the likely renewable (Building Block 3) capital allocations that are to come. Utilities already want storage for “firming” between resources. Windmill operators needing to comply with new regs, are going to see higher net watt-hour delivery which will accelerate finding economies in arbtiraging evening generation, for daytime peak sale (esp. in places like Texas).

The company is a tougher nut to crack, even for the Senior Accountants among us 😉

Cash is clearly the concern for Tesla. Tesla isn’t going to be profitable for a long time, nor are they trying to be. They are trying to build an organization like no other auto company (design, production, software, sales, and refueling).

If they can keep access to capital, it is a bright future for them. If they can’t generate cash, through operations or debt/equity, things would get ugly quick.

Pushmi-Pullyu

At worst, Tesla can raise capital by issuing more stock. Of course, stockholders don’t like stock dilutions, but if the price of borrowing becomes too steep for Tesla, that would be the best strategy.

Finances isn’t my area of expertise, but if my understanding is correct, Tesla’s very high stock prices means that loans can be secured at a low rate; borrowed money is currently pretty cheap for Tesla.

Despite what Tesla bashers keep saying.

Josh, I feel the same way about Tesla. Elon Musk has said many times that he wishes he never had to go public with Tesla. His goal isn’t stock value, or returns for shareholders. His goal is to build an entire new infrastructure for EVs and eventually autonomous EVs. He will delay profitability indefinitely and use revenue to achieve his singular goal – revolutionizing energy and transport as rapidly as possible. Sure, every young company operates at a loss by reinvesting revenue. Even Amazon just FINALLY had a profitable quarter this year. So Tesla seems to be doing the normal thing, same trajectory. The only way Tesla will be consistently profitable is if it has so much revenue it can’t spend it and/or Musk decides to rest. I see Tesla investing billions upon billions on developing battery tech, perfecting autonomy, building an autonomous EV “cab” service (complete with a self-built infrastructure of autonomous charging station hubs to cycle fleets of 24/7 autonomous cabs), more Gigafactories, more parts built in house (Musk is infamous for his dissatisfaction with parts suppliers). Tesla can EASILY sell 500,000 vehicles a year and still operate at a loss. Not because it is a bad company,… Read more »
Boris

What worries me a bit is the 23% gross margins. I wonder what is the margin on base 70 when considering all the margin uplift P models give Tesla. If base margin is at 15%, that’s so tiny for a car that sells for $70k+, should be around at least 30%. I was hoping Tesla was cutting costs that enabled it to offer the 70, but it seems it’s not the case. One thing I’m hoping for is a Model S facelift next year, this should help bring down used Model S prices and boost new Model S sales too…

Pushmi-Pullyu

“What worries me a bit is the 23% gross margins.”

Why does it worry you? That’s significantly better than GM, Ford, and Toyota have done over the past few years. Honda is doing slightly better, though. At least, that’s what’s reported here:

https://www.stock-analysis-on.net/NYSE/Company/Toyota-Motor-Corp/Ratios/Profitability

Perhaps a better comparison is with BMW, also an upscale car maker, which has been running a gross profit margin between 19-21% since 2011:

http://ycharts.com/companies/BAMXF/gross_profit_margin

Boris

But BMW sells mainly their 1 and 3 series and their small SUV’s like X1 and X3, on their $100k cars they make 40%+ margin. And that doesn’t include all the margin that dealers make…

Ambulator

The Model X prices should be announce soon, so here are my guesses:

Model X70D $95,000
Model XP90D $145,000 (with ludicrous mode)

That should cause some cancellations but it may fix their earnings.

tftf

I also anticipate a sticker shock. Originally the Model X was advertised as “Model S price + up to 10%”.

We will see. They were waiting very long to reveal the prices and festures for the X.