Tesla Stock Falls 10 Percent On Lower Model S Volume Numbers

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2012 Tesla Model S Signature

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The price of Tesla Motors shares fell 10 percent yesterday, closing at $27.66--down $3 from the previous day's ending price--due to a reduced revenue forecast.

As described in a statement filed with the SEC, Tesla Motors [NSDQ:TSLA] says it will have sold only 2,700 to 3,225 cars by the end of the year, rather than the 5,000 it had previously forecast.

As noted on Business Insider and elsewhere, Tesla said it was ramping up production more slowly than anticipated, due in part to difficulties at some parts suppliers in delivering parts on time.

The company said it had built 255 Model S vehicles as of last Sunday, September 23, with 77 of those assembled just last week.

Tesla now projects that it will build more than 300 Model S cars, and deliver between 200 and 225 of them, by the time the quarter ends on Sunday.

During the fourth quarter, starting Monday, it expects to deliver between 2,500 and 3,000 vehicles, generating revenue of $400 million to $440 million--a reduction from its earlier projections of $560 million to $600 million.

Gross margin will fall due to the reduction in projected Model S sales, Tesla said, as well as delays in payments from Daimler for development work on powertrains for its Mercedes-Benz B Class E-Cell.

Third-quarter revenue is projected at $44 million to $46 million.

The company plans to deliver more than 20,000 Model S vehicles next year, it said.

Finally, Tesla said it has now fully drawn down the $465 million in low-interest loans from the Department of Energy under the Advanced Technology Vehicle Manufacturing program.

On Monday, the company was granted a waiver from a loan requirement specifying a specific ratio of assets to liabilities; it has until the end of October to come up with a proposal for speedier repayment of its DoE loan.

A spokesman for the department said Tesla had made all required payments to date on the loan, which the company said it expects to repay before its 10-year term.

2012 Tesla Model S, brief test drive, New York City, July 2012

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Principal repayments are to begin in December; interest payments began in February.

Tesla said it will have to raise additional capital if it is to avoid requesting yet another modification to the loan terms. It plans to sell 4.34 million additional shares, which it expects will raise $128 million to $148 million.

Tesla also said it had approximately 13,000 outstanding reservations for the Model S, up from 11,500 at its last report, and expects to add 2,600 more in the fourth quarter.

None of this should be surprising, given Tesla's opaque statements on production volume and its refusal to release monthly sales figures.

And given the major quality challenges suffered by Fisker Automotive, Tesla is perhaps better served by going slowly and doing everything it can to maintain the quality of a smaller number of Model S vehicles.

It simply goes to show that making cars is extraordinarily challenging and consumes ferocious amounts of capital.

Will Tesla Motors survive? Give us your thoughts in the Comments below.

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