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Elon Musk may have done it again

In Q1 2012 Elon Musk's electric vehicle startup Tesla Motor Comp. (TSLA) accelerated its losses, pouring out $89.9M USD in losses.  That's nearly twice the $48.9M USD it lost a year ago.

I. Model S -- Ahead of Schedule, the Perfect Panacea for Losses

Revenue for the quarter dropped from $49M USD in Q4 2011 to $30.2M USD in Q1 2012.    The drop comes as Tesla stopped its Roadster sales in North American.  Tesla continues to sell limited quantities of ~$100K Roadster electric sportscars in some other regions, and it's still drawing revenue from certain business deals.  But overall, the company's current flows of revenue are drying up.

Much like SpaceX, the other venture of Mr. Musk -- who often draws comparisons to the Marvel Comics character Tony Stark -- Tesla is in the midst of a massive R&D push.  And that push appears to be about to pay off.

Tesla Elon Musk
Tesla Motor Company CEO Elon Musk [Image Source: Michael Kelley]

In the good news department, Tesla announced that it will begin shipping its Model S electric sedan to preorder customers early -- next month.  Priced at $57,400 USD, the sedan will be $49,900 USD after $7,500 USD federal electric vehicle tax credit.  Despite costing half the price of a Roadster, the Model S is expected to offer sporty peformance, thanks to lessons learned from the Roadster experiment.

Tesla was profitable during the Roadster era, but post IPO plunged into debt to develop the new mid-range luxury electric sedan, which is expected to sell in much larger quantities.

2012, Tesla says is a "year of two halves", with next month's Model S launch as the dividing line.  The company has 10,000 preorders for the car and hopes to deliver 5,000 this year.
 
Tesla Model S [Source: Tesla Motors]

CEO Elon Musk says much of what is remaining is just paperwork.  He comments, "Once we complete and document the tests, we will be able to sell our vehicles in the United States."

The earlier-than-expected ship date for the Model S allowed Tesla to up its annual revenue estimate $10M USD, up to $560M-600M USD.  In other words, Tesla expects to be pulling in over $175M USD per quarter -- almost six times its current revenue.  Stock jumped nearly 10 percent on optimism about the Model S.

Even with extra costs, hopes are high that 2013 will indeed be as profitable as Tesla hopes.

Perhaps in part due to Mr. Musk's veteran leadership, Tesla continues to deliver on risky bids in a market that has seen many of its competitors like Fisker crash and burn.  Thus far Tesla's products have received glowing reviews even as startups and experienced players like General Motors (GM) faced more mixed reception.  Likewise, Tesla was never short on Roadster orders -- only production.  That's a bit different from GM whose Volt sales have reportedly struggled.

II. Future Looks Bright

In the short term, the next step is the Model X -- an electric crossover SUV featuring a slick gull-wing rear-passenger door design.  Tesla has already posted $40M USD in preorders on the model before a price has even been announced.  Production follows a similar model to the Model S, with ten to fifteen thousand units expected to eventually be shipped per year.


Tesla Model X [Source: Automobile Magazine]

Tesla will also be building the powertrain for Mercedes-Benz's EV.

Tesla will also start to profit off its deal with Toyota Motor Corp. (TYO:7203) whose ~$50K USD electric RAV4 SUV will launch later this year, powered by a Tesla powertrain.  Toyota's goal is to ship a modest 2,600 units over the next 3 years.

If Tesla's bid to creep into the mid-range market proves successful, the natural next step would be to take yet another high-risk plunge into the non-luxury EV market.  Don't expect that move to come immediately from Tesla, but it is definitely in the company's long term sights.  

Source: AP



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RE: Good to know
By Solandri on 5/11/2012 4:38:45 PM , Rating: 1
quote:
That's what subsidies are for, rewarding risk takers that develop an idea before it makes great financial sense.

Subsidies are, in general, a bad idea. They distort the market, creating artificial demand for a product. The risk-taker may be rewarded for something which never makes financial sense. That's what's happening to college tuitions. The government subsidizes loans under the pretense of making college "more affordable". The extra money means two things can happen: prices go up, and/or capacity increases. You want the latter, but there's no way to guarantee that the latter will happen. In the case of college tuitions, it's the former that's happening.

If you want to spur growth in an industry, you're better off just pouring R&D money into it directly. That comes with its own slate of problems (e.g. defense contracts), but the market's supply/demand balance remains undistorted. It forces a more honest appraisal of a technology. "I think we can get this to work for $100 billion." And $100 billion later, either it works and society recoups the cost, or it doesn't and the people advocating it have to convince everyone why we should give them more money.

In the case of energy, another alternative is taxation (kinda the opposite of subsidies). The pretense is that burning oil comes with all sorts of other externalized negatives (pollution, dependence on OPEC, war costs) which aren't fully factored into the price. If that's the pretense you're operating under, then the direct counter is to crank up the tax rate on oil to pay for those externalized costs. Trying to counter it with subsidies for alternatives makes it next to impossible to balance the two, and (as I mentioned above) distorts the market supply/demand balance because now all your energy is subsidized.
quote:
Oil companies should pay huge taxes when they are the most profitable companies in the world.

The problem is they're not. That's just a myth made up by people who hate the oil industry and didn't understand math well enough in school to know the difference between an amount and a percentage. They heard Exxon-Mobil posted the largest profit in history, and immediately concluded that meant they had a huge profit margin. (It was because Exxon-Mobil is the largest company in history, not because they had a huge profit margin).

Oil companies are actually about average in profitability. Tech and finance companies are the most profitable. (Exxon-Mobil is under "Major Integrated Oil & Gas" at 7.9% net profit margin, which is almost exactly in the middle of the list.)
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