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Tesla CEO Elon Musk says his company isn't worried about quarterly profitability. The Starkish playboy, who also founded SpaceX, recently rode away with millions in cash after selling part of his stock in Tesla's IPO.   (Source: Michael Graham Richard)

Tesla hopes to return to profitability in 2012 when it rolls out its new Model S EV.  (Source: Autoblog)
Company says it doesn't care about quarterly profitability

Tesla is sort of like hip-hop superstar of the auto world -- it's blowing through money like it could be dead tomorrow.  

The company had plenty of promising news so far this year.  In May it announced that Toyota invested in it and contracting it to help produce Toyota's upcoming electric RAV4 crossover SUV.  The company also secured $226M USD in cash from a initial public offering of stock.

However, according to its latest earnings report it bled out $103M USD in only its first 3 quarters to date.  Its latest loss -- for Q3 2010 -- was at $34.9M USD.  That's disappointing considering that in Q3 2009 the company only lost only $4.6M USD, and was profitable for the first two quarters of 2009.

Company founder and chief executive Elon Musk received the news of the big loss casually, commenting to the 
San Jose Mercury News, "Attaining quarterly profitability isn’t a goal… We’re very focused on long-term profitability."

Mr. Musk who pocketed a tidy sum of cash during the stock offering, says that with Toyota's support, too, the losses are less of a concern, writing in the earnings report:

We are very pleased to report steady top-line growth and significant growth in gross margin, driven by the continued improvement in Roadster orders and our growing powertrain business. Roadster orders in this quarter hit a new high since the third quarter of 2008, having increased over 15% from last quarter. While some of this is due to seasonal effects associated with selling a convertible during the summer months, we are pleased with the global expansion of the Roadster business and the continued validation of Tesla’s technology leadership position evidenced by our new and expanding strategic relationships.

So if Roadster orders are increasing, why is Tesla losing so much money?  The answer lies in its entry-level luxury electric vehicle, the Model S, which it wants to roll out.  Tesla hopes to sell the car for around $40K USD, after tax credit.  However, cutting its production costs in half is no easy chore -- particularly when Tesla hopes to complete the vehicle in just over one more year, beginning assembly in early 2012.

Tesla also has the advantage of strong support from the Obama administration and the U.S. government.  President Obama recently urged Republicans in Congress to back EV funding.

Those factors have led investors to be generally optimistic, and share prices currently are at above $24/share, over a 40 percent gain over the IPO price of $17/share.

The critical test for Tesla, though, will come in 2012 -- the same year that the Roadster will cease production.  If it can't deliver sufficient quantities of the 2013 Tesla Model S, or if it faces delays that could spell disaster for the newly public automaker.  And even if it can 
produce the vehicle, it faces the further test of whether the relative "masses" of entry luxury buyers really desire an electric vehicle from a relatively green automaker.  Tesla and Mr. Musk believe (or at least say they believe) that the Model S will sell very well -- and they better hope so, as the company's success depends on it.

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high price of admission
By Mitch101 on 11/10/2010 1:26:46 PM , Rating: 2
I would imagine that is just the cost of admission. What they are accomplishing isn't cheap and if they pull it off, which I think they will, they should do well or be bought out entirely down the road.

RE: high price of admission
By Smartless on 11/10/2010 1:42:43 PM , Rating: 2
True, leading the industry in high performance EV isn't cheap but one can only hope that CEO's who sell stock in their own company aren't telling us something. Remember the good ol' days when people put their heart, soul, pride, etc. in to their company? Either way, if Tesla falls I hope they've contributed enough worthwhile advancements before they take our money and run.

RE: high price of admission
By kattanna on 11/10/2010 2:21:23 PM , Rating: 2
since he is also the founder of spacex which is a leading contender to be making rockets for NASA, im doubting he is going to "up and run" anywhere.

RE: high price of admission
By MozeeToby on 11/10/2010 1:49:42 PM , Rating: 4
Why do we keep getting this "Tesla lost X million dollars this quarter" articles. They've stopped production of the Roadster, they have no significant income until they get the Model S into production. They knew they were going to be losing money in the meantime, this is completely, 100% in line with their business plans. That is why they wanted a large loan a year ago, so that they could end production of the Roadster and focus on bring the Model S to market as quickly as possible.

RE: high price of admission
By CU on 11/10/2010 2:29:05 PM , Rating: 3
Plus their stock went up from this news, because it was better than expected. It is at 27.66 right now up 12.3% today.

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