Tesla's Q3 had steep losses, predicts rapid revenue gains for Q4 and beyond
As Tesla Motors transitions from electric vehicle visionary to a mass production automobile manufacturer, many are wondering whether the company will make it financially. It has been decades since the last successful automaker startup in the U.S. With Monday's release of 2012 third quarter results to shareholders, the company claims it is successfully making this transition, that by December the company's production rate will be high enough to generate positive operating cash flow, and that by the end of the year the production rate will be twice that level. The company has a long list of other good news to share including awards and new show-rooms.
The company's financial status is most critical to anything else that Tesla Motors might achieve. It doesn't matter how beautiful is the company's vision, if they can't generate enough profit to pay for the company the vision will crumple.
Q3 revenues were $50 million, an 88% increase over 2012 Q2. The company attributes this to deliveries of the Model S (253 deliveries) as well as sales of the remaining Roadsters (68 sales) being sold outside the U.S. They also received revenue from Toyota for powertrains on the GenII Toyota RAV4 EV. Development progress on the electric drive train for the Mercedes Benz EV is on schedule, and generates a bit of revenue.
While revenue growth is great, R&D expenses alone ate up that revenue. Total loss for the quarter (GAAP basis) was $111 million.
Remaining cash at the end of the quarter was $109 million, some of which was restricted to prefund the Dept of Energy loan payment due in December. Just after the end of the quarter the company raised $222 million in further investment capital, raising cash to $330 million. Can you say "burning cash"?
What will turn around this pattern of steep losses and the need to raise investment capital to cover expenses? More sales, hence more production. There are thousands of people waiting patiently (or not) to purchase their Model S sedan, each of which is a large chunk of revenue.
Last week Elon Musk tweeted that they'd produced the 1000th Model S car body. The manufacturing rate has increased from 5 Model S's per week at the beginning of Q3 to 100 cars per week by the end of Q3, and since then they've increased the production rate to 200 cars per week. This translates to 10,000 cars per year. The company claims this production level is the threshold required to "generate positive operating cash flow". By December the production rate is expected to reach 400 Model S's per week, or 20,000 per year.
The production goal for 2012 remains decreased at 2,500-3,500 Model S's in 2012. This is less from the original projection of 5,000 Model S deliveries in 2012, and the company points to supply chain problems, saying they resolved "a myriad of supply chain issues in Q3 and are continuing to work with our suppliers to improve the timely and efficient delivery of parts."