Tesla 2nd quarter financial reporting reveals rosy outlook in face of market pessimism
Tesla Motors is a publicly traded company, and as such, is required to report its financials and give a summary of its business situation four times a year. Yesterday was one of those times and, accordingly, it sent out its latest shareholder letter and conducted a conference call, with CEO Elon Musk, CFO Deepak Ahuja, and George Blankenship (vice president, sales and ownership experience) fielding questions from financial analysts for over an hour. We listened in and, as well as getting an idea about the company’s financial health, heard a few tidbits worthy of passing along.
First, before we get to the good stuff, some quick numbers. Tesla posted a $105.6 million loss after receiving revenue of $27 million from sales of 10 Model S sedans, 89 Roadsters and 100 Toyota Rav4 EV drivetrains. That’s perhaps a smidge better than what was expected and things shouldn’t get too tight, as it still has access to $233 million in cash and sales could bring in as much as $600 million by the end of the year.
Still, there’s a lot of pessimism in the market when it comes to TSLA – fueled recently by a report from Wunderlich Securities, which predicted a need to raise more capital, as it doesn’t think a production target of 5,000 will be reached in 2012 – and the company’s stock price recently tumbled from just shy of $36 to just under $29 as of market close on Wednesday.
Production does seem to be Tesla’s biggest problem at the moment. It only just recently increased its build rate to 10 vehicles a week – up from five – after running into some quality issues. Small “knick-knacky” things as Musk describes them: interior trim not well-enough aligned in places, chrome finish on door handles not up to snuff. It has slightly revised the timing of production increases and bolstered it interior engineering team in response.
The company should now see about 500 vehicles produced in the 3rd quarter with a “geometric” ramping up in the 4th that should see an additional 4,500 beautiful all-electric machines roll off the line. While it’s sticking with its 20,000 unit prediction for 2013, the team acknowledged that at that rate, it would be able to actually produce 30,000 Model S next year. With reservations rolling in at record levels, it’s not beyond the realm of possibility that that might happen.
A continuance of the increased build rate will also help the company achieve it goal of reducing the wait time for customers. Currently, the queue stretches out for a year and it hopes to bring that down to three or four months as quickly as possible. Tesla realizes that when most people want to buy a car, they want it sooner rather than later, and a shorter line will lead to even more reservations and fewer cancellations.
So, what other interesting things did we learn? Well, perhaps the most exciting thing might be that the Tesla Supercharger unveiling should come in September. While we expect to see 90-kW charge rates, solar panels and battery swapping, we can’t help but wonder what else is involved. Musk believes it will change how people think about electric cars and says it’s, “Way cooler than anyone realizes.”
Musk also touched briefly on batteries. He stated that, while Tesla’s battery warranty covers the initial eight years, he expects the useful life of the packs to be good for double that. Still, he also conceded that warranty-covered replacements are being accounted for.
He is also staying consistent with his view of battery prices, saying that he sees a substantial drop coming in three or four years. Curiously, that timing also seems to coincide with his prediction of substantial chemistry improvements he says will arrive with the company’s less-expensive Gen III products.
If you’d like to check out all the details for yourself, you can read the 3rd quarter shareholder letter here (PDF) and listen to the recording of the conference call here.