‘Profitability in First Quarter for First Time in Our Ten-Year History’
California’s Tesla Motors has emerged as the bright star in an often dismal galaxy of electric transportation enterprises, turning a profit for the first time in the first quarter of this year behind record sales of $562 million, up 83% from the previous quarter. Tesla booked 4,900 vehicles as revenue in the quarter. And while 12% of revenues came from selling zero emission vehicle credits to other manufacturers, Tesla says it will make money in the fourth quarter of 2013 even without ZEV credits.
“Tesla reached profitability in the first quarter of 2013 for the first time in our ten-year history,” chairman and CEO Elon Musk said in a letter to shareholders. “We exceeded our own targets for deliveries, significantly expanded gross margin, and improved execution throughout the company. Excluding non-cash warrant and stock option items, we generated a profit of $15 million.”
The $59,900 to $94,000 MSRP
Tesla Model S this week received
spectacular reviews from Consumer Reports.
“In addition to record Model S deliveries,” Musk said, “we continued to supply full electric powertrains and battery packs at a steady pace to Toyota for their RAV4 EV program. We also completed various deliverables under the Mercedes Benz B-Class EV program which contributed to total development services revenue of almost $7 million.”
Also from the Tesla Motors (NASDAQ:TSLA) letter to shareholders,
- As our manufacturing processes stabilized and our supply chain continued to mature, we turned our attention to improving execution. In the process, we reduced the hours required to build a car by almost 40% from December to March.
- We improved our inventory management. During the first quarter, raw materials declined by almost 26%, while unit production increased 80%. Better inventory management contributed over $30 million in cash and reduced our logistics costs.
- During the first quarter, we consistently produced 400 or more Model S vehicles per week, for a total of more than 5,000 during the quarter. We recognized 4,900 vehicles as revenue, exceeding our initial first quarter guidance of 4,500, despite physically delivering a higher number of vehicles, as the standard for revenue recognition was extremely high. Even if a car was received, fully paid for and signed off as good by a customer, we did not recognize the revenue if the paperwork was incorrect.
Our goal has always been to make electric vehicles affordable to the mass market. The Model S is priced substantially lower than the Roadster and our third generation vehicle will again be priced much lower than the Model S. However, in the near term, we believe that the right financing product can make a significant difference to the affordability of the Model S.
- Working with US Bank and Wells Fargo, we are able to offer many customers the ability to buy a Model S with no money down (net of reimbursement from federal and state incentives) and an effective cost as low as $580 per month, taking into account savings from not using gasoline. When purchased for business use, the depreciation benefit reduces the effective monthly cost even further to as low as $350.
- Tesla guarantees a resale price in three years that is the highest of any premium sedan brand made in volume. We believe that this has the potential to make the Model S accessible to a much larger customer base.
- We are pleased with the strong global demand for Model S and are currently receiving orders at a rate greater than 20,000 per year worldwide. Importantly, we are seeing orders in a particular region increase proportionate to the number of deliveries, which means that customers are selling other customers on the car. Given that we have not yet delivered any customer cars outside of North America, there would appear to be significant upside potential.
We now offer top of the line Tesla vehicles as loaner cars. Through our valet service, which will be rolled out over the next three months, we deliver another Model S to the customer at their choice of location and pick up their car. Since we also plan to offer these loaner cars for sale at a discount according to age and miles driven, the loaner fleet is constantly refreshed, resulting in the loaner cars usually being newer and with more options than the customer car in service. For some additional fun, customers in most markets can opt to receive a Tesla Roadster while their Model S is in for service.
- Model S will also now no longer require an annual service contract to maintain the vehicle warranty. Moreover, for customer peace of mind, the battery pack now comes with a “no fault” warranty. Even if a customer never reads or follows the manual, the Model S battery pack is always covered by Tesla.
- We opened 12 new service locations, bringing our total network to 41 locations. We remain on plan to add approximately 30 service locations in total in 2013.
- At quarter end, we had 34 stores and galleries around the world, and plan to open about 15 more stores and galleries this year with about half the openings in Europe and Asia. This year we have already opened a gallery in Austin, Texas, and stores in Century City, California, and Frankfurt, Germany.
- We have been hard at work on improving our Supercharger technology and in building out new Supercharger stations, with a major announcement expected within the next few weeks. As always, Tesla Supercharging is fast, convenient and free forever.
- We recently introduced a lower cost, 60-kilowatt-hour battery pack for Model S. This Model S has outstanding zero-to-60 mph acceleration and an EPA-certified range of 208 miles on a single charge. We also introduced a Performance Plus option for our 85-kilowatt-hour cars. Using a combination of wider tires and enhanced suspension components, we were able to improve dynamic handling and ride quality while extending range by about ten miles.
- Our total cash was $231 million at quarter end, an increase of $10 million from last quarter, despite making the second quarterly principal repayment of almost $13 million on our DoE loan.
- We expect to build about 5,000 Model S vehicles in the second quarter. For the full year of 2013, we expect to exceed our prior target of 20,000 worldwide deliveries and feel comfortable raising guidance to about 21,000 deliveries.
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Source: Tesla Motors