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UPDATED: Tesla Motors Q1 Earnings: What To Look For (Video)

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Elon Musk Speaks

Elon Musk Speaks

Within the next hour, Tesla Motors [NSDQ:TSLA] will release its first-quarter financial results.

We already know the company will be profitable, and that it sold "more than 4,750" Model S electric luxury sport sedans from January through March.

CEO Elon Musk has also said that Tesla is targeting a 25-percent gross margin on sales by the end of the year.

But here are some other things to look for:

  • Per-share profit: The consensus number on the Street is $0.04 [ACTUAL EARNINGS PER SHARE: $0.12]
  • Revenue: Expectations are that this will come in at about $500 million [ACTUAL REVENUE: $562 million]
  • Reservations: How much did the total number of U.S. reservations for Tesla cars fall?
  • Europe: As the company prepares to start selling in multiple European countries, how many reservations has it booked from there so far?
  • Revenue sources: Did Tesla break even on building and selling cars? Or was it profitable only because of two other sources of income: making electric powertrains for other car companies, and selling zero-emission vehicle credits?

We were asked to come on CNBC today to discuss the company before its earning call at 5 pm today.

The first couple of minutes of the video below shows CNBC automotive correspondent Phil LeBeau discussing some of the financials.

Then your faithful correspondent appears at the 1:44 mark, to talk more broadly about the challenges Tesla faces and what it's accomplished to date.

Meanwhile, if you're a Tesla Motors fan--and we know many of you are--stay tuned to the news tickers after the market closes today.

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Comments (25)
  1. Great interview, John.
     
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  2. Profit per share: predictably low at this stage
    Revenue: $500 million sounds pretty awesome considering the total investment so far
    Reservations: at some point the backlog must be cleared
    Europe: who cares, what about China? Okay that's too early, Tesla has only just started there but it's certainly more interesting for Tesla's future than Europe or possibly even the US
    Revenue sources: interesting point though there is no need to suggest that the cars are just a money loosing sideshow and the real money is in the credit trade.
     
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  3. ...and about the perennial suggestion that Tesla is not going to make it on its own and will be taken over another carmaker based on old ICE age wisdom: I think it's a mistake to underestimate Elon Musk. It would appear a lot of shorters are in for an atomic wedgie because they did.
     
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  4. One thing to note is that Tesla still has an operation loss. It is significantly smaller than the previous qtrs but still a loss. Its profit is from "other income" sources mostly from currency and stock sales and/or loans paid back...

    So, we will have keep an eye on that. But the fact is that the balance sheet has improved significantly.

    I don't know why GCR doesn't allow the link to the earning release be posted here...
     
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  5. Correct, the ZEV credit revenue does make the difference between profit or a substantial loss this first quarter. Car production in itself is already profitable though at this early stage but things like building an international sales network and the supercharger network continue to cost money. That sort of expenses aren't structural though of course and gross margin on cars still has a lot of scope for improvement. I wonder what sort of profit Tesla expects over fiscal 2013. Too bad the outlook didn't mention that.
     
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  6. Congratulations to Tesla.

    One thing to watch out for is the amount of operation loss. In this quarter, it is very small. The profit is a result from other income which includes some currency gains and stock sales.

    But overall a good sign for long term. The full release can be read here:

    http://files.shareholder.com/downloads/ABEA-4CW8X0/2468043081x0x661989/ee71d11b-3563-489c-9471-9319fd963626/Q1%2013%20Shareholder%20Letter.pdf
     
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  7. Having read the shareholder letter it seems mainly good news: better than expected revenue and profit, on track to build and sell 20K+ units, improved gross margin and a clear perspective of further improving gross margin to the target 25% without taking the ZEV credit revenues into account and despite the impact of lower sales prices due to cheaper versions.

    Tesla really makes a point of pointing out that it's the cars that have to make the profit because the ZEV credit trade might soon stop being the cash cow it currently is. Also it's probably eager to end the rumour that it "unfairly" benefits from this system, or that it has become too dependent on this income.
     
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  8. @Chris O: Hmmmm, isn't that the same point that some commenters took me to task for including in an article yesterday?

    :)
     
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  9. @ John Voelcker: I think making such a superfluous and axiomatic statement about the relevance of making profitable products in that context read like the suggestion that Tesla isn't actually capable of staying profitable in the long run many readers have come to expect from you which of course is bound to irk some people since it's largely baseless so far.

    I think the reason Tesla feels it needs to distance itself from the ZEV credit income is that it's another angle of attack for those seeking to discredit the firm, just like taking government loans turned out to be.
     
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  10. I'd think that the California Air Resources Board would suggest that the best way for Tesla to get away from relying on credit income would be for other automakers to develop compelling advanced drive train vehicles and sell them.

    There is no evidence that Toyota has a need to purchase credits. Nissan either.

    The point being that Tesla isn't doing anything unfair. California passed the original ZEV mandate in 1990 and nothing prevented any automaker from manufacturing a compelling Model S class vehicle themselves.

    The penalty was sized specifically to act as an incentive to innovate. Most manufacturers chose to invest in lobbying to overturn the rule instead of developing advanced vehicles. Toyota and Nissan chose a different path.
     
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  11. This is not about fairness, this is about sticks to hit the dog. So Tesla might be tempted to downplay the scope for ZEV credit revenue a little. From what I could find:

    "In 2015-2017, the basic requirement goes higher, and the "pure" ZEV requirement goes from 0.79% to 3%, which represents a requirement for ~52,500 pure ZEV credits per year in that time frame. Automakers aren't even close to having programs able to satisfy those requirements, so many of the surplus credits that Tesla will generate later this year will be sold later regardless. Thus Tesla has the option to sell their pure credits this year, or retain them for a couple of years and sell them for more".

    It's from a reader's comment so for what it's worth.
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  12. @Chris O: So, let me get this straight.

    When I write that things like ZEV credits may distract from the point that, in the end, Tesla must build and sell competitive cars at a profit to survive ... that's me looking for "sticks to beat the dog"?

    But then when Tesla CEO Elon Musk says exactly the same thing one day later in an earnings call, it's a "really good point"?

    Based on hundreds of your comments, I understand you are firmly convinced I want Tesla to fail & am doing everything within my (very, very limited) power to make that happen. You're very wrong, but you're certainly entitled to believe that.

    But this latest salvo really does have me scratching my head.
     
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  13. Look at the responses to the ZEV revenue article: it wasn't just me who noted the odd phrasing, why do you think that is? In fact I wasn't even the one to bring it up in the first place, since I decided to focus on trying to crack the complex ZEV credit trade nut, something you should try too considering the fact that the article betrayed a lack of knowledge.

    Don't misquote me: huge difference between "Tesla really makes a point"and Tesla makes a "really good point". It wasn't a better point than saying "grass is green" but I feel Tesla is forced to say it to avoid being attacked on its ZEV credit earnings.

    BTW: How does this earning report affect your opinion about Tesla's chances to make it in the long run?
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  14. @Chris O: Apologies for the misquote. I suppose typing while scratching my head is a bad idea.

    I've long had notes for an article diving into the complexities of ZEV credits and, at some point, will finish it. It's not news, per se, and our search data tells us that not many people will actually read it outside the dedicated few, so it's a lower priority. But I do want to get to it, for the reasons you and others have articulated.

    The earnings report is encouraging, and certainly if Tesla continues to execute well (as they have done) and fix mistakes quickly (when they occur), they may be profitable for the year.

    (continued in next comment)
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  15. (continued from previous comment)

    I continue to believe that (a) TSLA's current stock price may reflect a short squeeze; and (b) Tesla will not remain independent but will be bought by one of perhaps a dozen large global automakers.

    Its market cap is still only $6.4 billion, as of this morning. Even assuming a healthy premium, a global OEM might view a price of up to $10 billion as reasonable for a company that combines a luxury and tech-forward brand image, a top-three position in global BEV prodution, and profitable operations with plans to launch higher-volume models.

    I have views on who that company might be, too, but I'll save that for a future article. :)
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  16. There are more comments in this thread
  17. Nice interview except for the snipe against California ZEV credits / regulations.

    Without those regulations, Tesla would not exist today. One of the big reasons they still exist is because they generated a lot of revenue selling ZEV credits.
     
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  18. They would still exist. Tesla was founded and had published its plan to develop the Model S well before the current rules were put in place. They have a clear path to profitability even in the absence of credits, and they have enough cash on hand (and ability to raise more) to get there even without credits.
     
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  19. @Dave: I'm a bit perplexed by your use of the word "snipe". Tell me which part of what I said, exactly, criticized those credits? Was it the description of the math behind them as "arcane"?

    There are grounds on which ZEV credits might be criticized, but that wasn't the line of discussion I was trying to pursue. So tell me what came across as a criciticism?
     
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  20. I'm not sure about snipe, the CARB ZEV mandates are in fact pretty arcane. They are also very important for the EV development and possibly the future of motoring so an article explaining in detail the intricacies of these regulations would be very interesting.
     
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  21. Looks likes BIG boost to Tesla orders might be coming TODAY as CONSUMER REPORTS releases its test of the Model S and their teaser in the iPad version of this month's issue suggests the Model S is "the best car we have ever tested." Full report will be published in the July issue out in about a month. The report is to be on their website later TODAY.
     
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  22. So much focus on CARB ZEV Credits. This has more to do with where Tesla sells the cars, less to where they're manufactured.

    As earnings call noted, approximately 1 of every 2 Model S'es earn ZEV credit. Credits are only earned on sales in Part 177 states (having adopted California's ZEV mandate). In Q1 & Q2 ~100% of deliveries are in US. For 2013 an est. 15,000 US of 21,000 will be for US customers. This means by Q4 only ~1 of 3 deliveries will earn ZEV credits.

    For California; 10% of vehicles in 2020 will be ZEVs, 15.4% of vehicles in 2025, increasing to over 50% ZEVs by 2050. http://www.arb.ca.gov/newsrel/newsrelease.php?id=282

    For Part 177 states ZEV min.– opt'nl req'mts
    2015: 3.00% – 13.25%
    2016: 3.75% – 14.15%
    2017: 4.00% – 15.05%
     
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