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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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By tng on 11/11/2010 10:00:01 AM , Rating: 2
I agree here. The real tragedy is that most Americans believe that the US has no oil reserves left. Wrong, oil companies just figured out that it is cheaper to import and refine Middle East oil than to refine oil from almost anywhere here in the US (mainly because of the sulfur content of the oil itself).

Face it, the politicians in DC will put money into anything that makes them feel good about themselves, while not paying any attention to what would really help because it is not popular. They have become extensions of Hollywood.

Not one of them wants to clear all of the EPA hurdles that a business would have to leap for a new refinery to be built, new oil wells to be tapped or new mines to be opened for rare earth minerals. Doing so would mean that they would be criticized by a small percentage of people out there who are very vocal, even though it would help the country as a whole.


By FITCamaro on 11/11/2010 12:45:48 PM , Rating: 2
Its not even that the companies realized its cheaper elsewhere. It's that they're not allowed to do it here. Millions of acres of land have been banned by the government for oil and gas exploration. Notably the tar sands in the midwest.

It's also all but impossible to build a refinery in the US. Oil companies would love to refine more oil here but they can't. So instead they have to build refineries elsewhere and then import refined fuels which is far more expensive. Which drives up the cost of energy in the US.


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