Tesla Q4 Results Beats Estimates, Expects To Deliver 35,000 Model S Sedans in 2014

FEB 19 2014 BY STATIK 55

Tesla Reports Earnings From A Wintery 4th Quarter

Tesla Reports Earnings From A Wintery 4th Quarter

After the bell on Wednesday, Tesla released its 4th quarter results.  Overall the company reported a $46 million dollar profit, or 33 cents per share (ex-items).

The street had been looking for about 21 cents per share (adjusted) and a loss of 2 cents on a generally accepted accounting principles (GAAP) basis for the last quarter of the year.  After adjustments, Tesla lost 16 cents per share.  Of note: $4.6 million of profit was realized via a favorable currency swap.

In Mid-January At The 2014 NAIAS Tesla Noted Deliveries Of The Model S Were Tracking About 20% Higher Than Earlier Estimates

In Mid-January At The 2014 NAIAS Tesla Noted Deliveries Of The Model S Were Tracking About 20% Higher Than Earlier Estimates

As for overall revenue and sales, Tesla banked $761 million ($615 GAAP)against expectations of about $700 million.

For specific Model S sales the company had estimated that 6,900 Model S sedans would be sold in the quarter – in actual fact, they sold 6,892.

But more important than the revenues themselves is how much margin Tesla made on that money, and where they are going in the future.

The company had told analysts they were expecting to have an automotive margin of 25% by year’s end (excluding ZEV credits) – and almost hit that last quarter.

For Q4, Tesla indeed reached their goal with a margin of 25.2%.  Tesla sees this number going as high as 28% in 2014 “through a series of small design improvements, better supplier prices and economies of scale.”

For 2014, Tesla expects to deliver 35,000 Model S sedans, which would be up 55.7% over the 22,477 sold in 2013.

“Production is expected to increase from 600 cars/week presently to about 1,000 cars/week by end of the year as we expand our factory capacity and address supplier bottlenecks. Battery cell supply will continue to constrain our production in the first half of the year, but will improve significantly in the second half of 2014.”

Supplu Constraints Of Lithium Batteries From Panasonic Will Continue To Be Problematic For Tesla In The First Half Of 2014 (Panasonic/Tesla Booth At Tokyo Motor Show Shown)

Supplu Constraints Of Lithium Batteries From Panasonic Will Continue To Be Problematic For Tesla In The First Half Of 2014 (Panasonic/Tesla Booth At Tokyo Motor Show Shown)

It should be noted that inside this 35,000 number for 2014, Tesla estimates to deliver only 6,400 vehicles in Q1 (while building about 7,400) and that the bulk of sales will come from outside of North America to end out the year, pointing to transit issues for the sales decrease this quarter.

A statement by the company also shows how reliant they will be for sales growth outside North America going forward:

“The potential in Europe and Asia is even more significant. Towards the end of the year, we expect sales in those regions combined to be almost twice that of North America.”

Clearly this is Tesla’s first admission that ongoing US demand is much lower than is widely thought – but is offset by international demand that is conversely much higher than anticipated.

InsideEVs ourselves had pegged monthly demand in the US to fluctuate just between 700 and 1,100 for most months heading into 2014.  (so we are giving ourselves some premature back-pats on that now)

Other Revenues

“Both Toyota and Daimler powertrain programs remain on plan and contributed $13 million of revenue in the quarter. Q4 sales also included $15 million of regulatory credits revenue (GHG), but no zero emission vehicle (ZEV) credit sales.”

Tesla Model X Confirmed For "Volume Deliveries" In Spring Of 2015

Tesla Model X Confirmed For “Volume Deliveries” In Spring Of 2015

Looking Ahead

Tesla noted that R&D expenses were going to increase in 2014 as they work to expand their worldwide footprint as well as introduce the Model X to the world “in volume” in the Spring of 2015, along with early design work on their next, more inexpense offering expected in 2017.

“Operating expenses and capital expenditures will increase significantly in 2014, as we plan to invest in the long term growth of Tesla. We plan to expand production capacity for Model S and Model X, invest in our store, service and Supercharger infrastructure, complete the development of Model X and start early design work on our third generation car.

In Q1, operating expenses are expected to grow roughly 15%. R&D expenses will increase as design and engineering work accelerates on Model X. We expect to have production design Model X prototypes on the road by end of year and begin volume deliveries to customers in the spring of 2015. SG&A spending will grow as we expand globally our retail presence and add more Superchargers.”

Curiously, Tesla was mum on plans for a new “Giga factory” in this report , but said that information was coming soon:

“Very shortly, we will be ready to share more information about the Tesla Gigafactory. This will allow us to achieve a major reduction in the cost of our battery packs and accelerate the pace of battery innovation. Working in partnership with our suppliers, we plan to integrate precursor material, cell, module and pack production into one facility. With this facility, we feel highly confident of being able to create a compelling and affordable electric car in approximately three years. This will also allow us to address the solar power industry’s need for a massive volume of stationary battery packs.”

Shares were up as much as 15% in afterhours trading, and the stock closed Thursday at @$209.89, up $16.25 (8.39%).  A real time quote can be found here.  Also check out Tesla’s Shareholder letter in PDF form here.

Tesla is also holding an after-hours press conference (as well as a Q &A) Wednesday evening.  UPDATE:   Details of the call can be found here.

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55 Comments on "Tesla Q4 Results Beats Estimates, Expects To Deliver 35,000 Model S Sedans in 2014"

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The most interesting part of the letters is that Tesla expects to spend a ton of money next year on capital expenditures – ramping Model X, sales & service network, and more Superchargers. I wonder how that will affect their results and their market valuations – as that free cash flow goes from $40M now to a much smaller amount in Q3.

Also, clearly I was wrong on my Tesla stock price guess. Its up at 220 now. Geez.

pjwood

not flow, but total cash on hand of 846mm. That’s “Giga”.

Bonaire

A sizable amount of that cash on hand came from the Sr. Notes floated last May when they paid off the DoE loan. They also have grown their accounts payable due, from what I’ve read, and also Customer Deposits rose to $163M. Perhaps due to the very sizable China deposits per car? Still a lot of debt on the books as additional liability. The books aren’t brilliant and many people don’t look at all the numbers.

Anderlan

Good Will Funding. And I say in this case it’s actually only a good thing.

Mint

Logically, such spending won’t affect TSLA’s evaluation much, because whatever they spend out of their $800M+ pile of cash will only be a small percentage of their $20B+ evaluation.

Of course, the stock price is based entirely on years of speculative growth, so who knows how the street will interpret these things.

Driverguy01

..and shares are up $27 afterhours, what the hell is happening?

Boris

Wow, I am personally kind of scared owning Tesla stock at its current value, but it’s kind of exciitng to watch things developing. I bet it’s not that exciting for short-sellers however…

Ocean Railroader

I’m worried to in that this big furry guy has his eyes set on destroy Tesla’s value.

http://www.deviantart.com/art/Can-Tesla-Keep-Out-the-Bear-397660466

Personally I think Tesla is over do for a stock crash in that they keep pushing off the date of when the model X and Model E are going into to production and Nissian is also becoming more adhere with talking about releasing a 150 mile range leaf.

Tim

Nissan could release a 500 mile range Leaf and it wouldn’t likely matter. It’s a small hatchback that many find ugly. Range doesn’t make it better looking.

Ocean Railroader

The leaf does have a lot of room to grow in that it looks almost the same as the Nissan Versa and there are hundreds of thousands of them on the road and if the leaf could get better in range it could replace the Versa.

SeattleTeslaGuy

ignoring the ugly issue, the Leaf is simply in a different market from the Model S and X. Maybe they go toe to toe over the Model E.

MDEV

I heard that from many people since I got my shares for $50 🙂

abhishekifmr

Share price is up despite no info on giga factory..

pjwood

They hinted info forthcoming, during call.

abhishekifmr

No info in call as well. EM said next week 🙂

Ocean Railroader

I think 2014 is going to be the year that could make or break Tesla in that there are only so many people out there who can afford to buy a $75,000 car. A warning sign for Tesla that this is happening is in California where sales of the model S have leveled off and are not growing up by leaps and bonds. What could help is if Tesla found away to build a $50,000 version of the model S to take advantage of the falling costs of batteries. This is not really out of the question in that Tesla is talking about using battery improvements to release a 100 to 120 kilowatt battery pack to replace the 85 kilowatt battery pack. The 85 could then move down to to where the 60 is at now and the 60 could move down to replace the 40 kilowatt battery pack they stopped producing which was to be sold at around $50,000 dollars.

Tech01x

There are over 12 million households in the U.S. than can responsibly afford a $75,000 Model S. If each year 1/10 of them want to buy a car, then there are about 1 million households looking to buy a car that can buy a Model S.

abhishekifmr

+100

Anderlan

Exactly. Think of all the Hummers. An S is like an automatic Hummer indulgence. 🙂

Kosh

And as one of those households, even though I want and can afford a model S…. I won’t spend that kind of money for something that can get T-boned in an intersection.

Maybe I’m just fiscally conservative…..

Anon

The goal should be to survive being t-boned. Seems the Tesla holds up better than most in such unfortunate circumstances. Think
of it this way… How much is your life worth to you?

Kosh

Good point, but I can do that just fine in my ’99 dodge ram 4×4 right now! (oil burning guilt aside).

Dr. Kenneth Noisewater

I wouldn’t be so sure, a decade is a long time in engineering terms.. Compare your 4×4’s side impact results vs Model S and I bet it comes out the loser.

Mint

I think his example was pointing to the wider issue of depreciation: It’s tough justifying an expenditure that big when it’s just going to evaporate at maybe $10k/yr for the first 5 years.

A ’99 Ram has so little value that it won’t depreciate more than a couple hundred dollars a year. It may need $2-3k/yr in gas, but that’s a lot less than a new luxury car depreciates.

Of course, Kosh is clearly not in Tesla’s target market if he’s not looking to buy a luxury sedan.

pjwood

There’s an element of not wanting to buy gas which goes beyond depreciation/fuel cost analysis.

Tom A.

A vehicle is a losing proposition, period. I don’t look at vehicles as investments…more like necessary financial evils.

I bought a 2010 Mercury Mariner hybrid because it was versatile, it fit me (I’m 6’4″) and it gets great mileage for a boxy, mid-sized SUV (EPA 33mpg combined, I’m getting 35 mpg average).

At the time, Toyota was in the midst of that unintended acceleration issue, or I might have squeezed myself into a Prius.

Nix

Whenever somebody on a green car website brags about driving a 1999 Ram truck as their daily driver, I immediately have to question whether the person posting really gives a damn about green cars.

Sounds like one of the following sites may better serve your real interests:

http://www.ramforum.com/
http://www.fanpop.com/clubs/troll-dolls

abhishekifmr

As per my small knowledge USA has 5- 8 million U.S. households whose net worth totals $1 million or more. If this info is right than i would be surprised how they can’t sell more than 1000 cars per month in USA ?

pjwood

There are practically zero listings for Teslas below 70k, and dozens of configurations of 60/85’s that land south of 80k, after the 7.5k credit. The details on Chinese strategy, not to be priced as other do (which I think means shooting for a lot more), may be a sign they see a price ceiling for demand. I’m dreamin’ here, but maybe they see the options getting a little crazy, themselves. Free internet, for 4 years helps.

gigglehertz

China is expected to be the biggest market for luxury cars within a few years and Tesla has just started to sell there.

Boris

I don’t think 2014 could break Tesla, maybe the stock can come down, but that’s all. Elon Musk said before that for Model S to break even they’d have to sell 8,500 units a year and they are obviously doing much better than that. I personally don’t think Tesla will do good in Europe for various reasons (with UK hopefully the exception). The only thing I worry about is more fires and than the battery costs coming down for launch of model E. Elon Musk expects battery costs to come down by at least 30%, hopefully by 40% by 2017, so I really don’t think they can come down in price right now. Besides possible fires, I believe the only big hurdle will be Model E, if that thing is at $40K with 200 miles range and looking sexy and sharp with superchargers up and running across the US, then we have a winner

Tom A.

Agreed 100%.

Omar Sultan

I think this is flawed logic–no one worries about MB, BMW, Lexus, Audi being able to move $75K cars and there is no upside to reducing profitability when they are not demand constrained. At the very least, they need to be able to invest to get the Model X and the Gen III out the door. I think Tesla is focusing on the right things like the the SuperCharger build out to help eliminate the barriers to adoption.

O

Nix

Premium car companies like Porsche get by just fine not selling a single car less than 50K, with most of their models priced at or above Tesla’s 65K (after tax incentive) starting price for the Model S.

Do you also think that Porsche is in trouble too? (if so, let me know, and I’ll point you to their record sales and profit numbers…..)

DaveMart

I don’t fancy Tesla S sales in much of Europe.
They sold well in the Netherlands until subsidies were toned down and sell well in Norway which has massive subsidies and perks.
In Germany however where they don’t have subsidies and electricity is at $0.36kwh they sold a big fat 31 Model S cars in the whole of January.
I can’t see that improving much, and things are not much better in the other big European markets, where electric car sales have very little traction.

So I don’t think there will be the support they are counting on from European sales.
I am doubtful about sales in China too, but that is another story.

Nix

You forgot to mention that most of the EU is still stuck in their Austerity induced triple-dip recession that has led to Europe’s longest car sales slump in modern history. They are only now digging out of that slump, so it isn’t surprising that sales in Europe are slacking.

Chris O

Electricity is about €0,075/KWh in Germany if one has one’s own solar panels. Many people do have their own solar panels in Germany….

(assuming €6000 for a 4400WP solar installation generating 4000KWh per year for 20 years which should be good for 20K km/year)

I think a better developed Supercharger Network (€0,0/KWh) will gradually make Model S an attractive alternative to the Bavarian big three for the Germans.

Driverguy01

Fact is the stock shot up $25 in less than 30 minutes, so somebody bought a huge amount of shares in one shot…
he has better nerves than i do, thats for sure!

Bonaire

It was a 25-minute smooth walk-up after the initial Press Release. It wasn’t that many shares actually for the force that it created in the upswing. Today, it recovered from there in a very expected downtrend reaction.

pjwood

Q4 ZEV credit revenue was zero, which will clean things up in the eyes of some. Still fodder for the naysayers in 16mm, GAAP loss, but that’s a joke considering the RVG program is apt to be a major profit center, given resale value. Deferred revenue GAAP makes not sence because the RVG “put price” is too low to be of consequence. -more Tesla genius

I was nuts to “re-balance” my TSLA down, when it got back above 150.

Hey, another major thing was the solar disclosure for Musk’s intentions with gigafactory output. He sees the place as a supplier to the Dist Grid community. Don’t forget CA’s 1.3GW mandate, Musks 20-30GWH factory, and a lot of states following suit on energy storage. I still think he may do a capital raise under a separate entity, but it could be a profitable equity interest for Tesla, too.

Anderlan

“This will also allow us to address the solar power industry’s need for a massive volume of stationary battery packs.”

I see many things. I see plans within plans. I see 2 great revolutionary greentech corporations. Tesla Motors, Solar City, synergizing. I see *you* behind it.

Muahahaha.

+1 for Dune references. 😉

I do think the business of solar battery storage will be big, but I don’t expect it to hit it off until early to mid 2020s. Batteries are going to have to come down a *lot* to make them economical for grid storage.

In many places the cost delta between night time power and day time power is around 5-7c/kWh. If a battery has 1000 usable cycles, that means a battery can only cost about $50-70/kWh, including the costs of packaging and control systems. Then you have to factor in the extra costs of overbuilding solar power to generate enough for night and day.

DaveMart

That is why they tend to use different chemistries.
Having great cycle life is vital for stationary storage, and weight unimportant.

The only way lithium car batteries are economic for it is by using ones which are scrap for car purposes, but still OK for stationary applications, so the battery is basically already paid for.

I’d have zero confidence in turning out purpose made lithium car batteries for grid storage.
There are a lot better stationary storage batteries out there.

I agree, which means its not likely to be the same as the chemistry coming out of this gigafactory. Grid storage is better off using one the various chemistries that can stand up to a very large number of cycles (e.g. Li-Titanate at 5000-6000 cycles).

DaveMart

Lithium titanate batteries have much lower specific energy than the NCA batteries Panasonic make, so they won’t be switching to them for cars.
In general the things which make for great car batteries, a very reactive chemistry and light weight, are useless for stationary storage, and vice versa.
BYDs lithium iron phosphate is cheap and does loads of cycles, but twice as heave as the batteries in the Tesla.
Flow batteries look nice for stationary storage.
There are a number of variants, but here is the vanadium one:

http://www.scientificamerican.com/article/can-flow-batteries-replace-diesel-generators/

‘The battery relies on an electrolyte compound made of a mixture of vanadium, a metal commonly used to harden steel, and sulfuric acid in a container that can continuously charge and discharge. Unlike most batteries, the electrolyte would not degrade over time because the anode and cathode aren’t made out of competing material. And, since it’s mostly made of water, it’s nontoxic and can’t explode, according to Ron MacDonald, executive chairman of American Vanadium.’

Having said that though, Musk is not the only one going for lithium for grid storage, so who knows:
http://www.greencarcongress.com/2013/12/20131202-hitachi.html

KenZ
I don’t disagree with you, but will point out that when you make something like batteries (or solar cells, LED modules, whatever), you end up with a distribution of output properties, and then “bin” them based on their output/performance. When Tesla buys from Panasonic, I’m guessing they require Wh to be above ‘X’. So if Tesla is building a gigafactory, it may be (total speculation here) that they will effectively own the entire spectrum on the bell curve. One way to deal with that is to combine your lower bin and higher bin cells to even everything out in terms of usable Wh. But another approach would be to use the medium and higher bin/output mixes for the cars, and then use the stragglers, effectively lower in ‘value,’ for the stationary. I know Musk made some comment somewhere (I don’t recall where) that they are not depleting their car cell streams for their stationary business. One interpretation of that is that they’re using completely different cells. But the other is that they’re using the lower output cells that don’t make the cut for their cars… Again, all idle speculation, but not out of the realm of the possible.
DaveMart

OK, I know little or nothing about shares and so on, but I am going to stick my neck out.
I don’t think that Tesla can hit remotely near their sales projections, largely because I don’t think they will get anywhere much in Europe and China might be slow going, so I think there will be a major reduction in Tesla share price before the end of the year.

But then again, I thought that they would only manage to produce one model , and that it would be game over after the Roadster, like every other start-up car manufacturer in developed countries that I can think of for the past several decades.

Nix

Tesla shares will go up, and go down, and up, and down. It is volatile, so it will spend times doing both.

But your analysis is too EU-centric to properly reflect overall Tesla profits in this fiscal year. They are still too supply-limited in other markets like the US for EU and China sales to really impact share prices. Another year or three it might start to matter, but not this year.

Sam Kanu

Dont forget that the battery cells have a lifespan well in excess of their usable life as car components. In other words “used cells” from car batteries can be reused as solar energy storage.

I suspect this recycling will be also part of not just Tesla’s servicing and product guarantee programs but also their nationwide refuelling program where simply take your empty battery and reinsert a refilled one. They will have a stream of batteries that as they check them for quality, they can simply swap out the cells that need to be swapped out and sell those to the solar market.

Mint

As noted above, that selling price is going to be pretty low, because natural gas generated electricity is so cheap compared to gasoline. Amortized cost per cycle will have to be around 3c/kWh, i.e. $30/kWh if a used battery has 1000 cycles left in it.

…and to think I had bought Tesla stock at $35. Probably shouldn’t have sold, but hindsight is 20/20…

Anders

When some more SuperChargers are in place in Europe sales will grow fast. A lot of Toyota Prius, BMW, Audi, Mercedes customers will go for model S. When they understand that they will have much lower cost to own a model S and that it will be a very good longterm investment.
Solarpanel investments is increasing a lot and will also ad to more consumers will look at a Tesla as the car to own. Norway is selling at average 350 pcs. of model S every month and that will be the case in all over Europe as soon as SuperChargers are in place.
Norway has like 5 SuperChargers at the moment and will ad another 5 this year.

ModernMarvelFan

The biggest risk to Tesla is China.

I think Tesla is over-estimating the success in China since most the luxury buyers don’t live in a single home family residence. Luxury aptment or condo are more popular but those place lack the charging facilities needed to accomendate Tesla…

Ocean Railroader

I think in China some car company might strip a Tesla and come out with their own knock off at half the price. In fact I wouldn’t be shocked if the Chinese model E is driving around the streets over there right now.

will

When the new battery factory is built Tesla will come out with the Model 3 it has been reported to be compared to the lower cost of the BMW cost will be $35.000.00