Tesla shipped 6,892 Model S units in Q4 2013, 22,477 full year; battery Gigafactory announcement next week
Tesla Motors announced record deliveries of 6,892 Model S vehicles worldwide in the fourth quarter of 2013, with 22,477 vehicles in the full year. For the quarter, non-GAAP revenue was $761 million, up 26% from Q3. GAAP revenue for Q4 was $615 million, up 43% from Q3. Q4 non-GAAP net income was $46 million, or $0.33 per share, while Q4 GAAP net loss was $16 million or $(0.13) per share.
The differences between GAAP and non-GAAP are primarily due to lease accounting for resale value guarantee (RVG) and employee stock-based compensation as a result of the increase in stock price last year. The results show Tesla moving closer to break-even or profitability even on a GAAP basis. (GAAP net loss per share for the quarter ending 30 Sep 2013 was $(0.32), and for Q4 of 2012, $(0.79). For the full 2013 calendar year, net loss per share $(0.62), while for all of 2012, it was $(3.69).
In the letter to shareholders Tesla said that it exceeded its target automotive gross margin of 25%, achieving 25.2% on a non-GAAP basis and 25.8% on a GAAP basis. It achieved this by reducing vehicle cost—primarily through component cost reductions—as well as increased manufacturing and supply chain efficiency. Average pricing also remained strong due to a richer mix of 85 kWh cars and a high option take rate. In 2013, Tesla pulled in almost $2.5 billion in sales on a non-GAAP basis and more than $2 billion in sales on a GAAP basis.
Both Toyota and Daimler powertrain programs remain on plan and contributed $13 million of revenue in the quarter. Q4 sales also included $15 million of regulatory credits revenue, but no zero emission vehicle (ZEV) credit sales.
|“Model X demand is very high, even though there is zero marketing for the Model X. It’s like you are going fishing and the fish are jumping in the boat. We’re not trying to sell the Model X at all, but demand seems to be remarkably high, as we are seeing an accumulation of Model X deposits.”|
Looking forward, Tesla said that it was eyeing an automotive gross margin of 28%, excluding potential ZEV credit sales, as a reasonable target for Q4 2014, even if a lower option take rate is assumed. The increased margin is expected through a series of small design improvements, better supplier prices and economies of scale.
Research and development (R&D) expenses in Q4 were $58 million non-GAAP and $68 million on a GAAP basis. Non-GAAP R&D was up 21% from Q3, as engineering work accelerated on Model X and efforts continued for the adaptation of Model S in international markets.
|“We see good demand in China and right-hand drive markets. Based on current trends it seems unlikely we will be able to satisfy demand in China this year.”|
2014 Outlook. Tesla expects to deliver more than 35,000 Model S vehicles worldwide in 2014, representing a 55+% increase over 2013. Production is expected to increase from 600 cars/week presently to about 1,000 cars/week by the end of the year; Tesla is in the process of adding a new final assembly line, said CEO Elon Musk on the earnings conference call.
Battery cell supply will continue to constrain production in the first half of the year, but will improve significantly in the second half of 2014, Tesla projected.
|“We try to balance customer wait times. Last quarter we did quite a few European deliveries; customers there were waiting a long time. We have to balance that with slowing down US deliveries and try to make people as happy as possible, given production constraints.”|
First quarter production is expected to be about 7,400 vehicles, compared to the prior quarter production of 6,587 cars. However, as the number of cars in transit to Europe and Asia must grow substantially to support those markets, the company plans to deliver approximately 6,400 vehicles in Q1. Deliveries will grow in future quarters as the logistics pipeline fills.
Tesla expects the combined sales from Europe and China to be roughly twice that of North America. (Tesla is not breaking out either its sales or its projections by region.) The first Model S deliveries to China are scheduled for this spring; the company is planing substantial investments in China this year as it adds new stores, service centers and a Supercharger network.
Operating expenses and capital expenditures will increase significantly in 2014. The company plans to expand production capacity for Model S and Model X; invest in the store, service and Supercharger infrastructure; complete the development of Model X; and start early design work on its third-generation car. Operating expenses are expected to grow roughly 15% in Q1.
The company expects to have production design Model X prototypes on the road by end of year and begin volume deliveries to customers in the spring of 2015.
|“The Gigafactory would absorb all of the cells produced, and would still need to bring in more cells from around the world.”|
Gigafactory. In November last year, Musk suggested that a “giga factory”—a battery factory owned and operated by Tesla—was in the works. During the earnings call, Musk said that there would be an announcement next week, providing more information about the Tesla Gigafactory.
As sketched out on the conference call and in the shareholder letter, the Gigafactory is intended to achieve a major reduction in the cost of the battery packs and to accelerate the pace of battery innovation. Tesla plans to integrate precursor material, cell, module and pack production into one facility. With this facility, the company said, it would be highly confident of being able to create a “compelling and affordable electric car” in approximately three years. It would also allow the company to address the solar power industry’s need for a massive volume of stationary battery packs, Tesla suggested. (Musk is also chairman of Solar City.)
Musk was very tightlipped on the earnings call about any details of the factory, relegating questions about that to the event next week. However, he did say that Tesla expects there to be more than one partner in factory. Since Panasonic is Tesla’s primary partner on production, Musk said, the default assumption is that Panasonic would continue to partner with Tesla in the Gigafactory.