Tesla Reports Third Quarter Earnings, Gigafactory Ahead Of Schedule, Holds 50k Sales Guidance For 2015

2 years ago by Jay Cole 32

Tesla Reported Q3 Results After The Close Of Business On Tuesday

Tesla Reported Q3 Results After The Close Of Business On Tuesday

After the close of the trading day on Tuesday, Tesla reported earnings for the third quarter of 2015.

Tesla Model S Q3 Sales Adjusted Up Slightly to 11,605 (Image: Josh B/InsideEVs)

Tesla Model S Q3 Sales Adjusted Up Slightly to 11,603 (Image: Josh B/InsideEVs)

Heading into the announcemen,t the street expected a loss of ~48 to 55 cents a share (versus a gain of 2 cents a year ago), with revenues up more than a third to ~$1.25 billion.

In reality, Tesla came up a touch light on earnings, netting a loss of 58 cents per share ($1.78 GAAP), while revenue was mostly in line at $1.24 billion ($937 million GAAP).

Expectations for the company to lower 2015 full year guidance was not realized, with the company still saying it will sell at least 50,000 EVs this year, and north of 17,000 in Q4; which seems to be buoying the shares much higher after hours.

Shares traded up on the news in early Wednesday trade by about $22 or 10.5% at $230.50 (real time quote here).

Automotive gross margin for Q3 were 23.7%, while additional ZEV revenue was $39 million. Total gross margin was reported at 25.1% non-GAAP (24.7% on GAAP).

 

Model S/X Sales And Demand

Tesla firmed up earlier Q3 sales guidance of the Model S (and Model X) by stating 11,603 all-electric sedans were delivered (which was 25 units higher than first estimates).  Tesla directly leased 494 cars in Q3.

Model S/X sales by quarter in 2015:

  • Q1 – 10,045
  • Q2 – 11,532
  • Q3 – 11,603 (including 6 Model X)

Which makes a total of 33,180 EVs sold though September 30th.

2015 Guidance:  Perhaps surprisingly Tesla held at least the low end of guidance, pegging it 50,000 to 52,000 units.  The company did take down the top end of the range (that no one expected them to be able to hit) from 55,000 cars.

To hit the low end of guidance, Tesla would now need to sell 16,820 EVs in the last 3 months of the year.

“In Q4, we plan to build 15,000 to 17,000 vehicles, and deliver 17,000 to 19,000 vehicles, which will result in 50,000 to 52,000 total deliveries for the year.”

On the demand side, Tesla said they were seeing a ramp up in orders during Q3 across most regions.

“In Q3, global Model S orders increased by more than 50% from a year ago, and grew at a faster pace in North America, Europe and Asia, than during Q2.”

Tesla Assembly Capacity Increased By 35% Heading In Q4

Tesla Assembly Capacity Increased By 35% Heading In Q4

Tesla Production

During the quarter Tesla produced 13,091 vehicles (including a few Model X SUVs), and said that a recent plant upgrade has vastly improved assembly capacity.

“During the factory shut down, we retooled our final assembly line to increase throughput by over 35%, completed and commissioned our new paint shop, enabled new stamping equipment and launched Model X on its own new robotic body line.”

 

Tesla Autopilot Update

Despite hiccups in some regions (such as Hong Kong) Tesla states that over 40,000 updates have been sent out “over the air” to Model S sedans equipped with the feature.

“Thousands of Autopilot-equipped Tesla vehicles are gathering over one million miles of driving data per day. We then analyze this data and feed it back to the fleet to continually improve our customers’ driving experiences. Autopilot is so advanced and unique that test drive requests from prospective customers have increased significantly since its introduction.

To manage this volume of requests efficiently, consumers can now schedule their own test drives online, representinganother industry-first by Tesla.”

 

Tesla Demand Growing "Significantly" In China

Tesla Demand Growing “Significantly” In China

Tesla In China

Tesla pointed to China as the region that was showing the most promise thanks to new efforts by the company.

“In China, our newest major market, Q3 Model S orders increased substantially from Q2, due in part to the opening of two new retail locations. We expect order growth in China to remain strong with more store openings and the recent policy changes in Beijing and other major cities that allow buyers of Tesla vehicles to bypass license plate restrictions.”

The company recently stated that 3,025 Model S sedans had been delivered in China through the first 3 quarters (~1,345 in Q3), so we expect to see a decent surge in sales for Q4 given Tesla’s report.

Tesla CEO Elon Musk Demonstrates Falcon Doors On Model X From Launch Event

Tesla CEO Elon Musk Demonstrates Falcon Doors On Model X From Launch Event

Model X

While not giving specific numbers, Tesla says that early Signature reservation holders are converting to “firm production orders” at a higher rate than the company found with the Model S in 2012.

“Since the Model X launch event, order rates have accelerated for both Model S and Model X. Although it is too early to draw firm conclusions, this supports our belief that Model X expands the market for Tesla vehicles, with little to no cannibalization of Model S.”

We should note that, no one other than Signature series consumers (~1,300 persons) have yet been able to configure and/or order a Model X, so the only choice for the general public when it comes to actually ordering a car is still the Model S.

Conference call update:  Tesla CEO Musk confident they can get up to several hundred in production in December.  Also says that there are a “bunch of little things” that can/are giving the company issues now – highlights seats, door seals, but doesn’t seeing anything at the moment to not reach the targets given.

Conference call update (2): Musk is asked if the Model X is currently in production, and the CEO states that there are 1,000s of unique components in the SUV, with 99% of the ready for high production…but that the 1% is what will limit the production rate.

“Production will move as fast as the least lucky supplier that we have in our network.”

Tesla Gigafactory Now In Production For Tesla Energy Products

Tesla Gigafactory Now In Production For Tesla Energy Products

Gigafactory Update/Tesla Energy

Tesla Energy "Powerwall" Specs (click to enlarge)

Tesla Energy “Powerwall” Specs (click to enlarge)

During Q3 Tesla began “production of Tesla Energy products” at its Fremont factory, saying it’s long term plan is still to shift all production to the Gigafactory, but that growing demand for the Powerpack/Powerwall products have accelerated the need to expand capacity.

“In early Q4, we relocated production from Fremont to an automated assembly line at the Gigafactory.  This positions us for strong growth in 2016, but the Gigafactory pull-ahead will push some Tesla Energy Q4 production and deliveries into Q1.”

Tesla says particularly strong demand for energy products is coming from Australia, Germany and South Africa. Looking ahead, Tesla notes some new opportunities on the horizon:

“There is also an exciting market opportunity for us in India with strong government alignment that we look forward to growing in 2016. Recent changes to feed-in tariff structures in Hawaii also create a large new storage market in that state.”

Perhaps more importantly is Tesla’s actual cell production at the facility.

“We have also accelerated plans to begin cell production for Tesla Energy products at the Gigafactory by the end of 2016. This is several quarters ahead of our initial plan.”

Conference call update: Tesla CEO is asked about competition launching a more inexpensive battery (obviously in reference to GM’s $145/kWh deal with LG Chem).  Mr. Musk says they are always agonizing about battery costs but no one is close to Tesla right now – “If they are I will be the first to congratulate them”

Future Earnings/Sales

Tesla said that the addition of some Model X deliveries in Q4 will boost the average vehicle selling price over the next 3 months, but that Q4 gross margin will likely fall on a sequential basis, due to higher overhead factors on the Model X roll out.

2nd Row Seating In The Model X Has Been A Bit Of A Pain For Tesla

2nd Row Seating In The Model X Has Been A Bit Of A Pain For Tesla

Tesla is confident of Model S sales in Q4 and next year, but had some disclaimers surrounding the Model X rollout which has been more than a little reserved so far.

“Model S production and deliveries are on track to achieve our initial Q4 plan. The primary limiting factor to higher Q4 deliveries is the near term ramp of Model X production, with the biggest constraint being the supply of components related to the second row monopost seats.

To eliminate these supply constraints and achieve a better overall outcome, we have brought manufacturing of these seats in-house. In addition we, and some of our other Model X suppliers, are still ramping up and fine-tuning production. These factors add uncertainty to our build plans during Q4, but we feel emphasizing quality is the right decision for our customers.”

We should note that given only the Model X Signature Series reservists have been able to place firm orders, we feel the maximum optimized level of Model X sales Tesla could be anticipating right now for 2015 is about ~1,000 units.

Tesla Model 3

Not a lot of update on the Model 3, other than to re-iterate intention to show the 200+ mile car in March of 2016.

Conference call Update:  Tesla CEO Elon Musk is asked if anything to do with the difficulties in ramping the Model X would temper his expectations for the time on the Model 3

“Nope, Model 3 in two years!”

2016 Delivery Guidance

“Looking ahead, we still remain highly confident of average production and deliveries of 1,600 to 1,800 vehicles per week for Model S and Model X combined during 2016.” 

Tesla Q3 financials and shareholder letter can be found in PDF form here.

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32 responses to "Tesla Reports Third Quarter Earnings, Gigafactory Ahead Of Schedule, Holds 50k Sales Guidance For 2015"

  1. ffbj says:

    Wow. Tesla is in the news again, who would have thunk it?

  2. Anthony says:

    Tesla says they’ve started manufacturing products at the Gigafactory! “In early Q4, we relocated production from Fremont to an automated assembly line at the Gigafactory.” Don’t know what part this is, but we know its not the cells, but some other pack component.

    Tesla says they’re going to start manufacturing cells at the GF earlier than they were planning – by end of 2016 for the Tesla Energy line of products.

    Interestingly, it seems the GF is more focused on the Tesla Energy product line than the Model 3.

    1. MTN Ranger says:

      That makes sense since the Energy products are actually shipping while the Model ≡ is just in the design phase.

  3. David Murray says:

    I wonder how many Model X they will sell this year. It seems odd that they rolled out 6 in September, and only 4 more in October. I would have thought hundreds would be coming off the line by now.

    1. scottf200 says:

      Q3_15_Shareholder_Letter.pdf — Quote: “In Q4, we plan to build 15,000 to 17,000 vehicles, and deliver 17,000 to 19,000 vehicles, which will result in 50,000 to 52,000 total deliveries for the year.

      Model S production and deliveries are on track to achieve our initial Q4 plan. The primary limiting factor to higher Q4 deliveries is the near term ramp of Model X production, with the biggest constraint being the supply of components related to
      the second row monopost seats. To eliminate these supply constraints and achieve a better overall outcome, we have brought manufacturing of these seats in-house. In addition we, and some of our other Model X suppliers, are still ramping up and fine-tuning production. These factors add uncertainty to our build plans during Q4, but we feel emphasizing quality is the right decision for our customers.

      We expect that Model X will achieve steady state production capacity during Q1 as we do not foresee any significant production, design or supply chain constraints that will impact this plan. Looking ahead, we still remain highly confident of average production and deliveries of 1,600 to 1,800 vehicles per week for Model S and Model X combined during 2016.”

    2. no comment says:

      i think the model x is going to be very difficult to get into regular line production.

    3. Pushmi-Pullyu says:

      David Murray said:

      “I wonder how many Model X they will sell this year. It seems odd that they rolled out 6 in September, and only 4 more in October.”

      Perhaps the “only 4 in October” number is a few units lower than expected, but no one who remembers the slow startup of Model S production in 2012 should be surprised at a similarly slow startup of Model X production. Especially not with Elon saying the Model X is the most difficult car in the entire world to produce. Whether or not that’s true, it’s certainly an indication that Tesla is having difficulty ramping up production.

      “I would have thought hundreds would be coming off the line by now.”

      Whereas I’ll be surprised if the production by year’s end can be properly described as being at a rate equivalent to “hundreds per month”.

      On the other hand, the good news is that demand for the Model S has shot up, and Tesla will almost certainly make a higher profit margin on that model anyway, at least for the first year or two. Even if Model X production continues to ramp up slower than we hoped, overall Tesla is still increasing production significantly every year, and nearly as fast as previously planned.

  4. Ambulator says:

    Worse losses than expected, yet the stock goes up. I don’t understand this stock, but that’s part of why I leave that to the mutual funds I’m invested int.

    1. Anthony says:

      I believe there is an adage attributed to Warren Buffet – “Don’t invest in a business you don’t understand.” I guess that extends to their stock behavior!

      1. Jay Cole says:

        Expectations was for Tesla to lower full year/Q4 guidance (on the low end) to 45k-48k, or 12k-15k sales for Q4…instead they guided to 17,000 to 19,000.

        It sounds odd that it would trade up on a slightly higher loss than expected, but the movement was because the market had already lowered the stock to a level they thought fit with a ‘soon-to-arrive’ lowering of delivery/demand profile in Q4 today.

        /it didn’t happen

        1. no comment says:

          there are a lot things at which you can look (and at which professional investors do look) beyond the bottom line result. the purpose of it all is to gain some understanding of why the bottom line result occurred. for example, was it due to one-time or non-recurring events? how do operating profits look? how does the company’s revenue outlook look?

          the data that one analyzes to draw conclusions depends upon the structure of the particular business model so there is no “one size fits all” way to analyze a company’s earnings results.

      2. jmac says:

        Anthony –

        Buffet confessed he really didn’t know all that much about BYD when he bought it, but went on to say that he had people working for him that did.

        1. no comment says:

          i assure you that warren buffet does not have detailed knowledge of every company in the berkshire hathaway portfolio – that’s why he hires analysts.

      3. Roy LeMeur says:

        >I believe there is an adage attributed to Warren Buffet – “Don’t invest in a business you don’t understand.”

        Regardless of what Bob Lutz thinks, I think Elon has a crystal ball into the future.

        Smart people aren’t exactly losing money on Tesla stock. (or Solar City, or Space X)

        I am looking for the “what’s next?” thing Elon is going to do. Suspect it will have something to do with transportation. No… not the hyperloop. The hyperloop is actually an old concept from science fiction. Nothing new there. Costs a buttload for infrastructure.

      4. Mint says:

        A few million dollars more loss than expected is peanuts compared to long term expectations of TSLA by the market.

        If they made profit, but had to revise expected Q4 shipments downward, I bet the stock would plunge. TSLA is very dependent on the perceived trajectory of growth.

    2. ffbj says:

      Its a short squeeze.

  5. GrokGrok says:

    Since there will be a minimum (say 1000) number of Xs in this quarter’s delivery statistics, in order to make the delivery numbers it looks like Tesla is going to stuff the U.S. channel with every Model S it can make this quarter. If you want delivery in Fremont, you may be able to order in mid-December and get it by the end of the year. Perfect for those last minute shoppers!

    1. AlanSqB says:

      Seems like weeks 51 and 52 might be a great time to scoop up an inventory car at a huge discount.

      1. Pushmi-Pullyu says:

        The only time Tesla has offered a discount on its demo and loaner cars was to clear out the single-drive demo and loaner cars, after introduction of the “D” dual drive versions.

        If that was a “huge” discount, then that’s a rather low value for “huge”! Tesla increased the mileage discount from $1 off per mile, to $2 off per mile, and if I recall correctly, to also double the minor discount for every month of age.

        It’s amusing to see the Tesla bashers continue to try to characterize this as a “huge” discount. Pretty desperate guys.

        😀 😀 😀

        P.S. — To you TSLA short-sellers caught in yet another short squeeze: Tesla appreciates your continuing donations to help fund the company’s expansion!

        1. Three Electrics says:

          Elon,

          Even for a Tesla employee, your recall of the most obscure company facts is impressive.

          1. Pushmi-Pullyu says:

            Since I’m not a Tesla employee*, that’s an even bigger compliment.

            So thanks! 😀

            *nor is Elon, for that matter; CEOs are not “employees”

            1. sven says:

              CEOs are employees that can be fired by the board of directors. If you don’t believe me, ask Elon’s predecessor Martin Eberhard.

      2. Nick says:

        I wish.

        Tesla never offers large discounts. 🙁

        Even the old loner cars with “huge discounts” were very expensive.

        I fear I’m going to have to wait for a high mileage S to show up in the CPO program, or just hang out and wait for the Model 3.

        1. Josh says:

          Get in line (it’s long)

    2. This stock dumb and pump opens a nice new short entry opportunity in a few days.

  6. ModernMarvelFan says:

    Tesla will always find “good news” to pump up the stock over the shadow of “bad news”.

    If you are a believer, then any good news is good enough for you to buy the stock.

    If you are a hater, then any bad news is enough for you to “short” the stock.

    It is two sides of the same coin.

  7. Get Real says:

    I’ll take the much proven record that Elon Musk has in creating product/services of value that foreshadow the futures of their fields over the myriad cynics/skeptics/outright haters and cheater/manipulators anyday.

  8. Mister G says:

    GO TESLA GO

    1. ffbj says:

      I think you have finally gotten through to them. In other words they got the message.
      You ran it up the flagpole and they saluted.
      It worked.

  9. Scott Franco says:

    Go Tesla.