Tesla Motors (
) did not disappoint investors as it delivered yet another set of
solid results. During the quarter, the company's revenues stood at
$769 million, up from $620.5 million in the first quarter of fiscal
2014. The net income stood at -$62 million, or a loss of 50 cents a
share. The automaker produced 8,763 Model S vehicles and delivered
a total of 7,579 vehicles, outpacing its own guidance by a small
margin. This means that Tesla is on course to meet the 35,000
deliveries target for the full-year of 2014, which is in line with
the previous guidance.
Tesla had introduced a new lease program earlier in 2013. GAAP
requires Tesla to spread out the revenues of the cars sold through
this program over the lease tenure (i.e. treating these revenues as
deferred revenues). Therefore, a better method to gauge the
automaker's performance is to analyze the non-GAAP figures. On
a non-GAAP basis, Tesla's revenues were $858 million, up 55%
compared to a year ago. The net income stood at $16 million, or 11
cents a share.
We have a
price estimate of $150 for Tesla
, which is about 33% below the current market price. We are in the
process of revising our estimates to incorporate the latest
In 2014, the automaker expects to sell 35,000 Model S cars,
helped by higher production rates and expansion into new markets.
The second quarter's 8,763 vehicles produced means that Tesla has
upped its average weekly production rate to 730 and the full-year
guidance of 35,000 corresponds to a weekly production rate of ~700.
Meanwhile, the company has also been working on making its assembly
line efficient enough to be able to improve the production rate to
1,000 vehicles a week.
Tesla plans on producing 9,000 vehicles in the third quarter,
representing an increase of 2-3% over the second quarter. The
Silicon Valley based company increased its production rate by about
16% over the second quarter but will not be able to continue
accelerating at the same rate because of a planned two-week
shutdown of its factory to allow the transition of the
manufacturing process to a new assembly line. According to the
company, without the shutdown, it would have been able to forecast
a production rate of 11,000 vehicles for the quarter. The company
expects to deliver about 7,800 Model S vehicles in the same period.
Without the retooling, the company said it would have been able to
forecast 9,500 deliveries for the quarter. Since, just under 1,200
cars produced in the second quarter are only expected to be
delivered by the beginning of the third quarter, this means that of
the 9,000 cars produced in the next quarter, the company expects
only 6,600 to be produced in time to be delivered in the consequent
quarter. The company said that it expects the quarterly gap between
vehicles produced and vehicles delivered to decline in the future
quarters. This is important as some customers, especially in China,
have expressed disappointment at the time lag between time of order
and time of delivery.
Average Revenue Per Vehicle Corrects
During the quarter, the average revenue per vehicle stood at
~$101,465, implying a drop of 8.3% compared to the first
quarter. During the first quarter of 2013, the average revenue
per vehicle went as high as $115,000, buoyed by sales of ZEV
credits, to the tune of $60 million. Another reason why the figure
was higher during the start of 2013 was because Tesla had primarily
delivered its high-end versions first. As the automaker eventually
delivered its lower priced options, the average revenue per vehicle
witnessed a correction.
The revenue during the second quarter included the $23 million
generated from the sales of power trains to Daimler and Toyota.
Tesla has signed a deal with Daimler for the supply of power trains
to be used in the production of Mercedes-Benz B Class Electric
Drive. During the quarter, it also winded down the agreement for
the supply of power trains for Toyota's RAV4 Electric Vehicle, as
Toyota gets set to transition from electric vehicles to
hydrogen-powered fuel-cell vehicles. During the quarter, Tesla also
started leasing out cars to business ventures. Tesla's revenue
recognition for this leasing program differs from that of other car
companies: it will recognize revenue generated from leasing only
over the term of the lease unlike other companies which record the
full value of the car as revenue because they sell their cars to
independent dealers, who in turn lease these cars out to commercial
ventures. Tesla sells its cars directly to end customers and hence
bears the risk of defaults on these loans directly.
See full analysis for Tesla Motors
Impressive Margin Expansion
The automaker's gross margins increased by 140 basis points to
26.9% compared to 25.5% on account of an increase in the percentage
of vehicles sold via Tesla's lease program over the quarter. On a
non-GAAP basis, gross margins improved to 26.8%. Tesla's gross
margins have improved from 17.1% in the first quarter of 2013 to
26.9% in the latest quarter, helped by higher volumes and
operational efficiencies. However, the company thinks there is room
to further improve margins. Tesla is targeting gross margins
of 28% by Q4 2014. Auto companies, in their definition of cost of
goods, usually include some fixed cost components like labor costs,
plant operational expenses etc. Therefore, as volumes increase, the
additional revenues often result in improved gross margins.
However, Tesla also cautioned that administrative and capital
expenses will rise significantly as the company scales up its
customer support to keep pace with the growing global demand for
its products. The company stated that it plans to accelerate the
rate at which it opens stores and service centers. The plan is to
increase the number of company operated stores to about 300.
Additionally, the company plans to install more than 200
superchargers globally by then end of this year. Superchargers are
charging stations installed by Tesla for its customers to charge
their car batteries for free.
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