Tesla shipped 6,892 Model S units in Q4 2013, 22,477 full year; battery Gigafactory announcement next week
20 February 2014
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.” —Elon Musk |
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.” —Elon Musk |
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.” —Elon Musk |
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.” —Elon Musk |
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.
The 30 giga Wh per year battery factory that Tesla plan is enough for 353,000 Model S with a 85kwh battery (= 30,000,000kwh/85kwh) or 500,000 Model E with a 60kwh battery (= 30,000,000kwh/60kwh). The 30G factory will likely be build in California close to Tesla's current factory and it will add substantially to the capacity that Panasonic currently build for about 100,000 Model S battery packs in Japan or about 8Gwh.
I believe Tesla's battery cells cost about 300 USD per kwh produced at their current volume of 20k model S per year. A good rule of thumb for the manufacturing cost of almost anything is that you need to increase production volume by 10 times to achieve a 20% cost reduction per unit produced. Therefore it will take about 200k Model S battery packs to get to 240 USD per kwh (300*(1-0.2)) and 2 million Model S battery packs to get to 192 USD per kwh (=300*0.8*0.8) and 20 million Model S to get to 154 USD per kwh and finally 200 million Model S battery packs to get to 123 USD per kwh.
At 123 USD per kwh a 85kwh battery pack will cost roughly 10000 USD to make plus a few thousands for cell packaging. Because EV motors and transmissions are much cheaper than similar powered combustion cars and accounting for the substantial fuel savings of driving electric I do not think combustion cars are competitive/sellable anymore at 123 USD per kwh. It could be achieved in about 30 years from now.
There is a good article on Tesla by Forbes see http://www.forbes.com/sites/markrogowsky/2014/02/05/musk-we-hope-the-big-car-companies-do-copy-tesla/
Posted by: Account Deleted | 20 February 2014 at 01:51 AM
IT SEEMS TESLA IS TURNING OUT TO BE FIRST SUCCESSFUL ELECTRIC CAR OF THE WORLD. IF IT CAN BUILD A SMALL LOW COST ELECTRIC CAR WORLD AUTO INDUSTRY WILL TURN GREEN AND IT WILL BE REAL GAME CHANGER. TODAY COUNTRIES SPEND 70% OF THEIR EARNING ON PETROLEUM IMPORT. IT WILL CHANGE THE ECONOMICS OF THE WHOLE WORLD.
Posted by: Nirmalkumar | 20 February 2014 at 02:41 AM
Henrik, viewed from a different perspective, the Total Manufactured cost of the average Model S today is about USD65k. Since it is an Aluminum vehicle produced at low volume with a number of higher-end options, you might assume that around half the cost of the current P85 is in the Energy Storage System (ESS), which is cells, interconnection, structure, and sensors. That would put it at around USD380/kWh. Assuming that cells are about 75-80% of the ESS cost is cells, you get pretty much the same answer. I am a bit more pessimistic about the learning assumptions at the cell level, but I think the rest of the ESS is a candidate for ongoing cost reduction. As for the 30 year projection... that's a long horizon for projecting any consumer technology. Maybe dilithium crystals by then?
From a business perspective the glowing thing about the annual results lies in cash flow. Genuine positive cash flow from operations (NOT driven by investment) les and less dependent on regulatory credits is the real high point. I am astounded.
Nirmal: CHECK YOUR CAPSLOCK! Seriously though, what's worse is the 70% number: where in the world do you get that? Might be true in a few nations of the developing world, but not generally true at all. As of 2012, oil import as a % of GDP:
US and EU: just under 3%
China and Japan: just over 3%
India: a bit over 5%
Doesn't take anything away from TSLA's accomplishment, but we should have a reasonable perspective.
Posted by: Herman | 20 February 2014 at 09:59 AM
Henrik,
Your speaking as if Tesla will be the only consumer of batteries. Four years ago Li ion pack were running $1000/kWh, and now they are about $325 (average of all manufacturers) That's a 67% cost reduction in 4 years. So 2030 seem way too far out and very pessimistic. I think we'll be under $200/kWh by 2018. And, then a 24kWh pack will be under $4,800.
Nirmalkumar: Yes exactly. Which is why there is such push back from the current industries as they have no capabilities in the new arts, but have plenty of political clout and access to the fake media outlets like FOX, NBC, ABC etc. to badmouth the new technologies.
Posted by: Brotherkenny4 | 20 February 2014 at 10:08 AM
@Herman I inferred Tesla's battery cell costs with info from Tesla's battery pack prices. Tesla's 60kWh pack cost $37,102 and the 85kWh pack cost $44,564. In other words you get 25 kWh more battery for just 7462 USD ($44,564-$37,102) or just 300 USD per kWh (7462/25). This is the cost of the cells used in the battery pack. In other words, the 85kWh pack contains 25500 USD (300*85) worth of battery cells whereas the remaining 19000 USD (44500- 25500) is used 1) to produce the battery pack 2) to account for profit, 3) to account of insurance allowances (cost of inevitable battery recalls) and 4) to finance the cost of providing Tesla owners free electricity for life when using the Tesla supercharger network. Note that the 60kWh battery also cost 19,000 USD plus cost of cells that are 300*60 = 18,000 USD or 37000 USD in total.
I know 30 years is a long time to predict anything but to build all those factories from scratch it takes to make 200 million 80kwh batteries you need lots of time and a lot of capital. It may happen a bit sooner or somewhat later. It depends on whether other car makers will start to copy Tesla business strategy or wait until their survival depends on copying that strategy.
@Nirmal you could also just multiply the 100 USD per barrel with global production of 90 million barrels per day 365 days per year. You get 3,300 billion USD per year. Total annual world economic activity GDP is 84,000 billion USD. So oil is only 4% of the world economics. Much oil is traded below the 100 USD market price so oil is perhaps only 3% of global economic activity.
@BK4 I do not expect Tesla to be the only long-range BEV maker forever. But currently they are and they are the only one using the special type of battery cell that has very high energy density but also not so long cycle life. It is the only type of cell that enables long-rage BEVs so others will have to switch to using that cell if they are serious about BEVs.
Posted by: Account Deleted | 20 February 2014 at 11:32 AM
@Henrik,
The price per barrel is much less than the cost of the refined petrol + distribution markup for the petrol. Still, 4-7% sounds right.
Posted by: HealthyBreeze | 20 February 2014 at 12:54 PM
Henric,
3% is a lot. And that is not theretical cumulativ number like GDP but real cash outflow which realy cousing huge impact. Especialy taking into account that 10 years ago this figure was someting in range 0,5%. So 3% figure could be reason for world's economy crisis.
Posted by: Darius | 22 February 2014 at 12:17 AM
If a 130+ years old technology like ICE can be improved by 100+% in about 5 to 6 years, why couldn't a new technology like e-energy storage be improved at a much faster rate?
E-storage units may be improved by 100% every 3 to 4 years in the future. The older 2-2-2 (2012) technology Tesla batteries could be improved to 3-3-3 level by 2015 and 4-4-4 by 2018 or so.
Posted by: HarveyD | 23 February 2014 at 10:59 AM
Darius, nobody said 3% isn't "a lot". But it's far less than the 70% number thrown out by nirmal. I brought this up because of the common rhetorical error of exaggeration that characterizes energy advocacy. When we use numbers like "70% of earning[s] on oil import", we dilute our case.
Posted by: Herman | 24 February 2014 at 06:44 AM
USA uses about 19 million barrels of crude and bio-oil per day, At an average price of $100/barrel this is equivalent to 4.6% of the current USA gross national product.
However, since the retail price is a bit over $200/barrel, the total cost of liquid fuel used in USA is equivalent to about 9.2% of the gross national product. That is 3X the 3% given above.
Posted by: HarveyD | 24 February 2014 at 01:41 PM
Harvey, it is indeed 3x the 3% mentioned above. But the 3% figure above refers to OIL IMPORTS, not overall spend on petroleum and refined fuel products (imported and domestically produced). I brought up the number because a previous poster had stated "70% of earnings" (ostensibly 70% of economic output, or GDP) on "oil import". Now that number is wildly incorrect. The United States consumed 18.9Mbpd in 2013, 7.5Mbpd of which was domestically produced (EIA estimates quoted NYT 24 Jan). Net imports = 12.4Mbpd for 2013. At $100/bbl that is about USD453 Billion for 2013. Estimating 2013 GDP at USD16 Trillion (assuming growth in 2013 of 2.5% overall from the 2012 level of USD15.7 Trillion), US oil imports in 2013 were 2.83% of GDP.
Posted by: Herman | 24 February 2014 at 08:31 PM
The right numbers for USA are:
US GDP: 16,240 billion USD.
US spending on oil per year: 694 billion USD (= 19 mbpd * 365 * 100 USD).
Total spending without refinery and distribution is 4.27% (= 694/16240).
The average retail cost of gasoline in the USA is 3.52 USD a gallon and it takes 42 gallon a barrel. Assuming the gasoline represent the average cost of refined and distributed oil products in the US we get a total expense for oil products at 19*42*3.52*365 = 1025 billion USD. This is 6.3% of US GDP.
6.3% is a very high number but the US spend more during the oil crisis in 1981 where the inflation adjusted oil price was also 100 USD and oil was used for all transportation and nearly all heating and electric generation. Now it is only used for transportation.
Used sources:
GDP https://www.cia.gov/library/publications/the-world-factbook/geos/us.html
Gas price per gallon retail http://www.eia.gov/dnav/pet/pet_pri_gnd_dcus_nus_w.htm
http://en.wikipedia.org/wiki/File:Crude_oil_prices_since_1861.png
Posted by: Account Deleted | 26 February 2014 at 01:05 AM
Unfortunately we have a bit of bad news for Tesla Motors today as New Jersey joins a handful of states in the U.S. that are barring Tesla’s direct-sales model, making it illegal for Tesla to sell its vehicles directly to consumers. A new proposal will now make it impossible for Tesla to sell its electric vehicles in the state, which Tesla says is “an affront to the very concept of a free market.”
The New Jersey Motor Vehicle Commission has responded to a request by the New Jersey Coalition of Automotive Retailers to tighten its regulations, which means that Tesla would only be able to sell its vehicles through a franchise. Up until now, Tesla had been pushing for the issue to be debated before the state legislature, since Tesla first started selling cars in New Jersey just over a year ago.
Tesla maintains that it is necessary to introduce their own vehicles to the market because electric cars are still relatively new technology and it is important that consumers are properly educated about the benefits of going electric. In response to the proposal that will block Tesla’s sales in New Jersey starting on April 1, 2014, Tesla criticized Governor Christie’s administration for pushing the legislation through at the last minute.
Governor Christie’s administration responded by stating that it does not find it appropriate to change the way that cars are sold in New Jersey without legislation and continues that Tesla was aware of the administration’s position from the beginning. New Jersey joins Arizona, Texas, Colorado and Virginia, all of which have similar bans on Tesla’s direct sales approach.
This is a result of Dealerships wanting to protect their status quo.
Posted by: ai_vin | 12 March 2014 at 10:11 PM