Tesla feels ‘all-electric’ with best-ever earnings results from Silicon Valley

8 Aug 2013

Model S signature red car in motion. Image via Tesla

PayPal co-founder Elon Musk’s luxury and, increasingly, more affordable electric-vehicle pioneer Tesla Motors has posted its financial results for the second quarter of 2013. The Silicon Valley start-up’s financial status looks brighter after a topsy-turvy few years for the electric-car brand, giving investors a potential deep sigh of relief. Tesla said its financial position and balance sheet have ‘never been stronger’.

In a letter to its shareholders, Musk, chairman and CEO at Tesla, and Deepak Ahuja, CFO at Tesla, said that while profits were still modest in absolute terms and not the company’s “primary mission”, net income increased by 70pc from last quarter.

Tesla said that this was driven by “record” deliveries of its Model S car in North America, in addition to what it described as a significant improvement in automotive gross margin.

‘Strong’ balance sheet for Tesla for Q2

It has reported a strong balance sheet with almost US$750m in cash and no government debt.

Musk and Ahuja told shareholders that total cash was US$747m at quarter end, an increase of US$516m from Q1.

“During the quarter, we raised a little over US$1bn through the issuance of 4.5m shares of common stock and US$660m of convertible debt. About US$450m of the offering proceeds were used to pay off our DoE [Department of Energy in US] loan, including an US$11m fee for early payment,” said the duo.

Here’s a snapshot of Tesla’s financial status in the second quarter, ending 30 June 2013.

  • The company’s net income (non-GAAP) increased by 70pc from Q1 to US$26m.
  • Tesla said it sold 5,150 Model S vehicles in North America in the quarter.
  • Non-GAAP net income for the quarter was US$26m or US$0.20 per share. Tesla said this excluded one-time and non-cash items, and the effect of lease accounting.
  • The Q2 results compare to US$15m or US$0.12 per share of non-GAAP net income last quarter.

“Since consensus estimates reflect non-GAAP results with lease accounting, our comparable Q2 non-GAAP net income was US$7m or US$0.05 per share,” said Tesla in its Shareholder Letter.

“In this letter and going forward, we will report our results on a GAAP basis as well as on a non-GAAP basis, excluding lease accounting,” the company’s chief said.

Inside Tesla

Tesla Paint technology for its EVs. Image via Tesla Motor Events

DoE loan is now repaid – Tesla’s financial position has ‘never been stronger’

With Tesla’s recent US$1bn capital raise and subsequent repayment of the US$440m outstanding loan from the DoE, Musk and Ahuja pointed to how the brand’s cash balance grew to almost US$750m during Q2 2013.

“Our financial position and balance sheet have never been stronger.”

They said that, during the quarter, Tesla improved its production rate by 25pc from 400 to almost 500 vehicles per week.

It seems that 5,150 cars were delivered during the quarter, surpassing Tesla’s forecast of delivering of 4,500 cars.

Outlook and future forecasting

The company says its primary focus is on expanding production to meet worldwide demand.

Tesla’s management believes the brand is on track to achieve Q4 gross margin of 25pc, excluding ZEV credits.

Speaking to investors, Musk indicated that Tesla expects production to increase from Q2. The company anticipates that a “considerable number” of vehicles produced during the quarter will be heading to European markets at the end of Q3.

“As a result, we plan to deliver slightly over 5,000 Model S vehicles in Q3, and remain on plan to deliver 21,000 vehicles worldwide for 2013.”

The company is planning to deliver European Signature Series cars and said demand for 85 kWh cars remains “strong”.

Over 13,000 Model S customer vehicles are now on North American roads and have clocked up almost 60m miles.

Tesla Roadsters

Tesla Roadsters grace the pavements. The line was discontinued in 2012. Image via Tesla

The company’s original innovation, the Tesla Roadster, entered production in 2008. The line was discontinued in 2012, following poor sales. Then Tesla started targeting the family and saloon marketplace with the more modest Model S. This car entered production in 2012. Deliveries for Model X are expected to begin in 2014.

Vision for Europe: Norway comes first

This week, Tesla also began its aggressive international expansion by delivering the first Model S vehicles to customers in Europe.

“As demand for Model S grows, we are continuing to expand our manufacturing capacity as well as our global footprint of service centre, retail and Supercharger networks,” said the company today.

In the quarter, Musk announced that the company produced several hundred more Model S vehicles for use as service loaners, for customer test-drives and for deliveries to European customers in Q3.

“We are now doing final assembly and testing of vehicles at our European manufacturing facility in Tilburg, Netherlands.

Tesla has recently opened seven new retail locations and now has a total of 41 such locations worldwide. Thirty of these retail outlets are in North America, eight are in Europe and three in Asia.

China attack

Tesla is now planning to open several more locations this year, including its first store in China. In the near term, the company says it will slightly curtail the rate of stores openings in favour of more service centres. This is because Tesla believes that simply increasing its service centre coverage is sufficient to drive “substantial Model S sales in any region that has a critical mass of Model S customers”.

“We only opened six service centres in Q2, for a total of 47 globally, but will accelerate this dramatically in coming quarters and relentlessly focus on providing a level of service that is as close to flawless as humanly possible,” said Musk and Ahuja.

More on Musk

President Barack Obama pictured being given a tour of the commercial rocket processing facility of Space Exploration Technologies, known as SpaceX, along with Elon Musk, SpaceX CEO, at Cape Canaveral Air Force Station, Cape Canaveral, Florida, in April 2010. Credit: NASA/Bill Ingalls

US President Barack Obama receives a tour of the commercial rocket processing facility of Space Exploration Technologies, known as SpaceX, along with Elon Musk, SpaceX CEO, at Cape Canaveral Air Force Station, Cape Canaveral, Florida, in April 2010. Image via NASA/Bill Ingalls

Siliconrepublic.com will follow up on South African-born inventor and entrepreneur Musk today. We will feature a more in-depth piece on the man who co-founded PayPal and Tesla and who has gone on to found the space-travel company SpaceX. At the minute he is also chairman of the US solar-tech company SolarCity.

We will be delving into his fascination with electric-car technologies for the past two decades, despite having just turned 42 in late June …

Carmel Doyle was a long-time reporter with Silicon Republic