released second-quarter results last Thursday, reporting
revenue and earnings per share that beat expectations, the market
didn't quite know how to react. Shares jumped between gains and
losses in after-hours trading. But the confusion wasn't
surprising: With future aspirations driving much of the share
price, the items that matter to the market go much deeper than
Tesla's quarterly results. It took some time after the earnings
call to digest all the important story lines before the
market decided that it had incrementally more confidence in the
company, sending shares up 4% on Friday.
Model S 21-inch turbine wheels with red brake calipers. Image
source: Tesla Motors.
Here are 11 telling quotes from both Tesla's second-quarter
shareholder letter and its quarterly conference call, grouped by
topics, which help encapsulate some of the likely drivers behind
why the market may have more confidence in Tesla after its
According to the Q2 letter: "Provided that we execute well and
there are no serious macroeconomic shocks, Tesla's annualized
delivery rate should exceed 100,000 units by the end of next
This would be quite an accomplishment, considering that Tesla
is only guiding to deliver 35,000 vehicles this year.
Adding some perspective to the number, CEO Elon Musk said
during the call that the company expects the upcoming Model X
SUV, which is scheduled to be launched early next year, to make
up roughly half of those deliveries.
Regarding annual shipments next year, Musk said the number
could be higherthan 60,000, which would boost year-over-year
growth in deliveries from an expected 55% this year to somewhere
closer to 100% for 2015.
Tesla seems more confident than ever that demand for its vehicles
will not be a problem, emphasizing the issue repeatedly. For
example, the Q2 letter states: "[E]ven though we increased both
production and deliveries, average global delivery wait times
increased because our production growth was unable to keep pace
with increased demand."
Tesla store. CEO Elon Musk said sales per square foot in the
company's retail stores are the highest in the world, doubling
Apple's. Image source: Tesla.
that demand for Tesla's Model S may have peaked in North
America and in some markets in Europe, orders are rising in both
regions. According to the letter:
Model S orders, and thus demand, continue to grow even in
our most established markets. In both North America and Europe,
Q2 Model S orders increased sequentially at a much faster rate
than for the rest of the automotive industry. Accordingly, we
believe these markets remain under-penetrated. We expect demand
to continue to increase worldwide as we continue to grow our
customer support infrastructure and broaden the appeal of our
products, and as consumer awareness improves.
The Model X is increasingly looking like it is going to be like a
From the Q2 letter: "Development efforts remain on track for
production of Model X in the spring of 2015. We anticipate having
operational Alpha prototypes ready by next week in order to
confirm design intent and Beta prototypes to be ready later this
Tesla's Model X SUV next to the Model S. Musk said during the
company's 2014 annual shareholder meeting that the production
version of the Model X looks much better than the one on its
website. Image source: Tesla Motors.
The demand story for the car is ridiculously good. Musk put it
in perspective during the call:
Let's just put the orders in context. There are no cars
available for a test drive. There is no information about the
cars in our stores because we're only selling the S. In fact,
if somebody comes in who wants to buy the X, we try to convince
them to buy the S. So we anti-sell it. And we don't really
provide all that much information or details about the car or
provide a definitive date on when you can get it. Despite all
that, there's huge demand from around the world for the X.
And even though no one has even seen the official production
version of the Model X, Musk said in the conference call
that customers are right to desire the vehicle:"They don't
really have enough information to know they're right, but they
Perhaps the most overlooked quote in the entire quarterly letter
to shareholders may be this one about the Gigafactory, or Tesla's
planned factory to produce lithium-ion batteries:"We have also
chosen to slightly accelerate our investments in production
capacity and the Gigafactory."
While it's impossible to understand exactly what Tesla means
by this, any acceleration to this already monstrous project is
impressive. The Gigfactory is no small endeavor. It's purposed to
deliver production capacity to support battery packs for 500,000
vehicles per year by 2020.
Related to the trajectory of cost savings that could result
from the Gigafactory, Musk spoke boldly about it on theconference
call: "I'd be disappointed if it took us 10 years to get to $100
a kilowatt-hour pack."
The Model S battery is built into the floor of the vehicle.
Image source: Tesla Motors.
This is a huge statement. It would imply that within the next
decade electric vehicles would reach cost parity with, and
upon, the cost of an internal combustion engine vehicle. But on
the call, Musk was confident:"Seems pretty obvious to me."
The new wild card
The most important quote of all from the second-quarter
It was heard on the conference call: "In the past we've shown
all of our cards, so people have kind of gotten used to us
showing all of our cards. We're not currently showing all our
What is this wild card? No clue. But it's already eating into
operating expenses, apparently, so it could be revealed soon.
Answering a question about the trajectory of the company's
operating expenses, Musk reemphasized this wild card on the
conference call: "I mean another thing, our CapEx and R&D
numbers are better than they appear because there are things you
don't know about."
But these quotes barely touch the surface of all the new and
interesting material from Tesla's most recent shareholder letter
and earnings call. Anyone interested in the company should take
the time to check them out
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originally appeared on Fool.com.
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