Tesla Motors To Be Profitable Selling Electric Cars By April, It Says Page 3

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Tesla Model S

Tesla Model S

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Tesla had to fly in the 21-inch tires from Europe because it took longer than 30 days for the tires to arrive from the maker--which required payment in 30 days.

The company, unwilling to pay for goods it hadn't received yet, held its payments until the tires arrived--which caused the tire maker to cancel its credit line. Mayhem ensued.

Once the situation got sorted out, the halt in sea shipments meant Tesla had to pay to fly in the tires to keep its production lines rolling.

"I wanted to punch myself in the face for that one," Musk said.

Slamming an analyst

And he had specially harsh words for one industry analyst, IHS Automotive, which had projected that Tesla would build 1,500 cars a year--not the 20,000 it projected and is now working toward.

With Tesla an unknown quantity to the auto industry's parts suppliers, those companies tended to rely more on third-party estimates than on the volumes of their parts Tesla had actually ordered.

"Suppliers looked at that forecast, and tooled up for some puny number of parts," Musk said, and were "caught flatfooted when we said, 'No, we really did mean the order we sent you'."

Tesla Motors had a number of conversations with suppliers where they "realized we really weren't kidding about that."

Now, Musk said, suppliers are more ready to believe that the company's production goals are serious--and price breaks for higher volumes of parts are kicking in as well.

That includes the price of the lithium-ion cells for its battery packs, supplied by Panasonic (which also owns part of Tesla Motors).

The cost of its cells will fall this spring, Musk said, which will have a beneficial effect on profitability for all Model S variants.

Leasing eventually

While Tesla already has a leasing partner--Athlon--lined up for its European customers, in North America, all deliveries are now outright purchases.

Leasing is something the company wants to offer, Musk said, and it could arrive in the second half of this year. Tesla wants to make sure the terms of the lease are "compelling," and talks with financial institutions are "progressing in a good direction."

Large banks, he noted wryly, tend to like the notion that Tesla will be profitable in Q1--it gives them "greater confidence" that the startup carmaker is a company they would want to partner with.

Next year, Musk concluded, "leasing will be a big factor" for Tesla. In Europe, it will be "at least a moderate factor" this year.

Tesla Road Trip from MD to CT, Feb 2013 - Tesla Model S cars at Delaware SuperCharger location

Tesla Road Trip from MD to CT, Feb 2013 - Tesla Model S cars at Delaware SuperCharger location

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SuperCharger announcement coming

Musk nodded briefly to the existence of the controversial review in The New York Times, in which a Model S ended up on the back of a flatbed truck.

He acknowledged that in colder regions, the SuperChargers should be more closely spaced--120 to 150 miles apart, perhaps, rather than the current 200-mile separation between SuperCharger locations in Delaware and Connecticut.

The company is rapidly deploying more SuperCharger stations, he said, including in Texas, the Chicago area, and other East Coast locations.

And he hinted at future upgrades to the SuperCharger system. "We've got a fairly meaningful announcement about a step change in SuperCharger technology coming later this year," he said.

That had originally been what the company wanted to have the New York Times review cover--so, Musk said, "Who knows?" Tesla might invite the Times to do another review later in the year.

Acknowledging hard work

During the call, Musk paid tribute to the hard work of the entire Tesla Motors team.

The results being reported today, he said, are due to "an enormous amount of hard work by a really dedicated group of people. We're going to be profitable, which is a pretty big deal, but it took an enormous amount of blood, sweat, and tears to get there."

"It's difficult for me to overstate the level of difficulty," he said, "but we're going to do it. I'm really proud of that--and we can say that with confidence."


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Comments (12)
  1. Great work John, as ever. I read the shareholder statement, looked at the balance sheet and P&L but that didn't give me the meeting review which you have.

    I can completely sympathise with the supply chain issue. I've been caught by supplier balls ups that led to me flying super heavy stuff around the world and taking a loss just to keep a customers. It's devastatingly annoying.

  2. You're 100% correct on the supply chain issue, of course, Brian. I work for a motor supplier and was contacted by Tesla several times about three different motor applications. My company eventually declined to work further with Tesla (at the time) due to the low volumes and the fact that the specifications were never really official.

    At the time, many brilliant people at Tesla, but limited money & resources made working with it very tough. That's meant to compliment Tesla for making so much progress. With limited resources and many suppliers declining to work with it, Tesla has still done a great job despite occasional problems typical for a new competitor.

    To face what Tesla has thus far and achieve what Tesla has is just amazing, IMHO.

  3. It's a serious challenger to Audi A8 ,BMW 7 ,Mercedes S as a status symbol for a younger tech savvy generation.For the over 50 age group Mercedes S means something and for today's affluent Tesla is all there ideals in an earth friendly package.It has much right to exist and succeed as model does and we should all hope it does.

  4. Thanks John Voelcker for an extremely informative and objective article detailing the story behind the numbers.

    Really helps under stand how profitability is something that doesn't happen overnight by just reaching production goals but only after the production process is fully rationalized.

    Fascinating to learn how analysts like IHS can make life difficult for newcomers by misinforming suppliers. Very insightful...

    Glad to learn that the most crucial factor -demand- isn't really an issue this year and since the effects of leasing, finance and lots of other measures Tesla could take haven't even kicked in yet I'm sure Tesla's future looks pretty bright for years to come.

  5. I'm in agreement with @ChrisO, John Voelcker has created a great article with well organized and explained details.

    It must have been extremely frustrating to Tesla employees to be ramping up production of their high-tech baby, only to see them pile up, waiting on tires to roll off the production line.

    If I'm reading numbers correctly, over half (1200+) of Model S's production delivered Q4 was built in just three weeks of December. (2400 of 2750 built in Q4 were delivered & Tesla was operating at 400 level for 3 weeks in December) This is pretty amazing milestone as number of Roadster's delivered was ~2400 total.

  6. Tesla's future sounds bright, they have done an excellent job of sticking to their set milestones. Looks to me like this little electric auto maker will be a perminate fixture on the automotive landscape. And Tesla may be the driving force in remolding that landscape.

  7. obama and elon can fly on taxpayer dollar wings, ha ha ha

  8. What's a troll doing out in daytime?
    Who's minding your bridge?

  9. If Tesla thrives (and so the signs are encouraging, already paying back some of that taxpayer's money) and forces the rest of the industry to early adoption of alternatives for petroleum like plug-ins it's the best money the taxpayer ever spent.

  10. Come on, John V., ban this clown already. You've written an outstanding article and most here have valid comments. Then, of course, you have Ms. Cox with the daily childish nonsense and name calling.

    If she truly cannot act as an adult, then there should be no room for her here, on a professional site.

    As for the article and Tesla, great news. One could nitpick, but the bigger picture is that Tesla is doing well. Sorry, Ms. Cox...

  11. John, I agree with everyone that this is one of the most well written articles I've seen regarding EVs in a long time.

    I am very proud of Tesla and what they have accomplished. When Lotus discontinued the Roadster gliders, I thought they were doomed. I thought there was no way they were going to survive for years without a product and produce their own design in high volume. They sure made a believer out of me. And, they continue to do everything right against a constant drumbeat of bias, sabotage and misinformation from the press and the analysts.

    Well done Telsa. People really do want 200-300 mile EVs and they are the only company getting it done.

  12. Did Elon say, April 1st by any cance ?

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