Tesla Motors shares rose Tuesday, after the electric-vehicle maker and energy storage contender reported third-quarter results that came in just under reduced investor expectations.
Tesla reported a net loss of $230 million, or $1.78 per basic share, on revenues of $937 million in GAAP terms, according to Tuesday’s investor letter (PDF). Non-GAAP net loss was $75 million, or $0.58 per basic share, on revenues of $1.24 billion, coming in line with projections.
Tesla also slightly lowered its annual vehicle-delivery forecast to between 50,000 and 52,000 EVs this year, slightly lower than last quarter’s downward projection of 50,000 to 55,000 vehicles.
Even so, Tesla shares rose from a market close of $208.35 to as high as $228.70 in after-market trading. That’s still far from the high of $270 reached before the company’s Aug. 5 second-quarter earnings report, which laid out the company’s troubles in meeting previously promised annual targets amidst the ramp-up of production of its new electric SUV, the Model X.
In a Tuesday conference call, CEO Elon Musk said Tesla expects to meet its delivery targets for the Model X, with sales increasing steadily since it first went on sale in September. “We’re making steady progress with each passing week,” he said, and has brought in-house the production of its second-row monopost seat, a component it had previously been short on.
Tesla is building the Model X at the same factory that makes its Model S sedan, which has slowed down production of that model line as well. The company lost a week to retooling its assembly line, but expects the improvements will increase throughput by 35 percent. All told, Tesla produced 13,091 vehicles in the third quarter, including its first Model X vehicles delivered on Sept. 29, mere days before the close of the quarter.
Tesla projects it will meet its fourth-quarter targets of 17,000 to 19,000 vehicles, and it doesn't “see any fundamental obstacle to achieving our production rate of several hundred vehicles per week in the next month,” Musk said. Next year, it hopes to reach average production and deliveries of 1,600 to 1,800 vehicles per week.
As for Model 3, Tesla’s long-awaited electric vehicle that will sell for under $35,000, that’s still on track for a March 2016 unveiling, and Musk said the goal is to bring it to market “as soon as humanly possible." Meeting its targets for this middle-income EV will be critical to meeting its goals of producing 500,000 vehicles by 2020.
Tesla has suffered some PR setbacks in the past few months. Last month, Consumer Reports gave a “worse than average” rating to the Model S, after finding hitherto undiscovered quality problems in what had been previously been a glowing review. Musk noted that the report still came with many pluses for the company, such as the 97 percent “yes” answer as to whether or not owners planned to make their next car a Tesla.
And its new Autopilot feature, unveiled as part of a broader Model S Version 7.0 software upgrade released last month, got some good press, but with a bit of sticker shock -- a $2,500 activation fee for the auto-driving and auto-parking features upon purchase, or $3,000 if activated after the fact. It also led to some drivers posting videos of themselves shaving while driving and other such no-hands stunts -- "There have been some fairly crazy videos on YouTube. This is not good," Musk said.
“We’re aware of many accidents that were avoided due to autopilot, and we’re aware of no accidents that were caused due to autopilot,” he said. Eventually, self-driving vehicle technology will become a standard part of all vehicles, he said. Still, the company "will be putting some additional constraints on when autopilot can be activated to minimize the possibility of people doing crazy things with it," he said.
On the energy storage side, Tesla opened its first production line at its Gigafactory, the $5 billion plant outside Reno, Nev. where it plans to assemble batteries for both automotive and grid storage applications. It's the first line to bolster Powerwall and Powercell battery system production now being done at Tesla's Fremont, Calif. facility. The company also accelerated plans to begin battery cell production at the Gigafactory by the end of 2016, several quarters ahead of its initial plan.
Musk said that Tesla Energy has already taken enough orders for it to sell out its entire 2016 projected production at the Gigafactory. As for price per kilowatt-hour, “We don’t think anyone is on a path to be even close to us,” he said. “If they are, I will be the first to congratulate them.”
Tesla Q3 highlights
- Cash and cash equivalents were $1.4 billion at the end of the quarter, up $275 million from the same quarter last year. That figure was boosted by Tesla’s August equity offering that raised $739 million minus fees, and offset by $392 million in capital expenditures, primarily for the capacity expansion and tooling associated with Model X and Gigafactory construction, as well as repayment of $50 million drawn against its asset-based credit line.
- Automotive revenue was $1.16 billion on a non-GAAP basis, which includes GAAP automotive revenue of $853 million plus a net increase of $307 million in deferred revenue due to its lease accounting. Automotive gross margin was 23.7 percent on a non-GAAP basis and 22.8 percent on a GAAP basis, in line with expectations.
- GAAP cash outflow from operations during the quarter was $203 million -- a figure that does not include $163 million in cash inflows from vehicle sales to bank leasing partners, and does include $31 million for its direct leasing business. "Adjusting for the impact of our leasing and financing business, our core business was almost breakeven on cash generated in Q3 prior to capital expenditures," the company wrote.