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Tesla delivers 6,457 Model S cars worldwide in Q1; GAAP net loss of $50M, non-GAAP net of $17M

During the first quarter of 2014, Tesla Motors produced a record 7,535 Model S vehicles for global delivery; the company also delivered 6,457 cars worldwide—slightly exceeding guidance—while also filling the pipeline of deliveries into Europe and Asia. North American net orders grew sequentially by more than 10% in the quarter. Tesla delivered 1,181 cars with a resale value guarantee (RVG) in Q1.

Non-GAAP revenue was $713 million for the quarter—up 27% from a year ago, while GAAP revenue was $621 million, up 10.5% year-on-year. Q1 non-GAAP net income was $17 million—up 10.3% from Q1 2013 results—while Q1 GAAP net loss was $50 million, compared to Q1 2013 GAAP net income of $11.4 million. Both results include a $6.7 million net gain from a favorable foreign currency impact. (Tesla continues to report both GAAP and non-GAAP results.)

Cash at quarter end, including cash equivalents and short-term marketable securities, increased to almost $2.6 billion, due in part to the issue of $2 billion of senior convertible notes with five- and seven-year maturities. Q2 financials will reflect an additional cash inflow of $267 million from the exercise of the convertible notes over-allotment option by the underwriters.

Q2 & 2014 Outlook. Tesla is planning to deliver some 7,500 Model S vehicles in Q2, moving toward a 2014 goal of more than 35,000 units. The company plans to produce 8,500 to 9,000 cars in the quarter, representing a 13% to 19% increase over Q1. Battery cell supply will still constrain production in Q2 but should improve in Q3, the company suggested.

Production is now at almost 700 vehicles per week, up 15% from the weekly production rate at the end of Q4. By the end of 2014, Tesla expects the production rate to rise to 1,000 vehicles per week.

Tesla said that Model X efforts are on track to ramp up production in the spring of 2015. The company has completed the final studio release of the vehicle, and the tooling process has started with several suppliers. Tesla expects production design prototypes to be ready in Q4 of this year.

Tesla also said that its Gigafactory project is on course to begin battery cell and pack production in 2017. The ultimate location for the Gigafactory is not finalized, and Tesla will start work on at least two locations in parallel in order to minimize risk of delays arising after groundbreaking. Tesla said that its planning discussions with Panasonic and other potential production and supply chain partners “continue to go well”. At full, annualized production, targeted for 2020, Tesla expects battery pack production capacity to reach 50 GWh and cell production capacity to be 35 GWh.

Recognizing leasing revenue
Tesla will recognize lease revenue over the term of the lease in both GAAP and non-GAAP financials. Automotive OEMs recognize full revenue for the price of the vehicle—even if that vehicle is eventually leased—because the vehicle is first sold to an independent dealer.

Although leasing has begun, Tesla expects to lease only about 200 cars in Q2, due to the lead times between vehicle orders and deliveries.

Tesla has also begun production of powertrains for the Mercedes B-Class EV, and expects to ramp up production and see continued growth during the year.

Tesla plans to invest $650-850 million for the year in capital expenditures for increased production capacity, growth in store, service center and Supercharger footprints, Model X and S development and start of Gigafactory construction. This will lead to being slightly free cash flow negative in 2014, before considering the equity required for leasing.

Comments

Account Deleted

That 50Gwh factory compares to 625,000, 80kWh battery packs. I think Tesla will be the only car maker in the world with over 500,000 BEV sales per year in 2020. I do not see a large market for the short-range BEVs that everybody else are making although each short range model may probably be able to sell between 50k to 100k units per year.

In 2020 we may have a situation where Tesla have 33% of the global EV market by units sold and 66% of the global BEV market when calculated by kWh used for the battery packs. I think (but could be wrong) that the one thing that makes Tesla so difficult to copy from its competitors point of view is Tesla's patents regarding their inductive motor controller. Benz are buying that motor controller from Tesla because they can't yet make one themselves that is just as good and does not violate Tesla's patents. I think that motor controller allows Tesla to produce powerful induction motors (over 170hp) that are cheaper to make, more efficient and less heavy than anything of similar power using a combustion engine or other electric motor designs.

Another advantage that Tesla have is that they are already the volume leader in the production of powerful induction motors and as a buyer of automotive grade batteries. That means Tesla already have less cost for these components than their potential competition.

Engineer-Poet

The AC Propulsion drivetrain was putting out 200 hp peak around 10 years ago.  A quick web search finds a figure of 368 hp measured on a dynamometer for the Model S.

TM

I hope they know how to control quality. If quality goes down as their volume ramps, they will be creating a maintenance nightmare.

Engineer-Poet

How strange, my comment disappeared.  Trying again:

Telsa's drivetrain originated with AC Propulsion, an enterprise financed by EPRI.  The first version was called AC-150, because it had 150 kW (roughly 200 hp).  The current version is much improved; a quick search finds several claims of 386 horsepower measured at the wheels.

HarveyD

Next generation batteries could be around by the time Tesla's mega battery factory is in operation?

The next generation Tesla S-120 could also see the day.

Other extended range BEV manufacturers may have to use similar under-floor battery packs and could become regular Tesla customers?

Jim McLaughlin

Yes, the AC Propulsion drive train produced 150 kW peak, continuous was less than half of course. But I never felt a need for more power with that thing.

Engineer-Poet

Someone towing a boat or horse trailer might.  When we get the batteries that can handle that, the drivetrain will be there.

Account Deleted

AC propulsion has played an important role in Tesla's birth as a company. This quote from Wiki boils it down well.

"Before Tesla had developed the Roadster's proprietary powertrain, the company licensed AC Propulsion's EV Power System design and Reductive Charging patent which covers integration of the charging electronics with the inverter, thus reducing mass, complexity, and cost. Tesla then designed and built its own power electronics, motor, and other drivetrain components that incorporated this licensed technology from AC Propulsion. Given the extensive redevelopment of the vehicle, Tesla Motors no longer licenses any proprietary technology from AC Propulsion. The Roadster's powertrain is unique."

I may add that the more or less hand build Roadster engine has been further developed into the mass producible induction motor that now powers the Model S. Tesla call than engine their 2. generation engine whereas the Roadster's engine was their 1. generation engine. Tesla will make a new engine called the 3. generation engine to be used in the Model E (which it will not be called for sure as it give the wrong impression that this car will be an economy class vehicle when it in fact is a luxury class vehicle competing with other 40,000 to 50,000 USD combustion vehicles).

I do not know it for a fact but the power controller that Tesla now sell to Benz could be a precursor for the 3. generation power controller that will also be used for the "Model E". Benz has probably ordered Tesla to be able to supply up to 50,000 units per year of that controller because it is unprofitable to launch a 40,000 USD car that can't sell in these quantities.

Herman

Tesla needs to raise (and spend) $5B in capital between now and 2017 to establish the Gigafactory and in turn make the theoretical "GenIII" possible. The $650-850M CapEx planned for 2014 (none of which goes to the new battery factory) seems to have sobered investors who saw free cash flow drop by $120M. Finally a 30% jump in R&D and surging SG&A still results in a late introduction of the Model X, and ostensibly funds neither the GenIII design nor the extensive R&D for reduced cost battery production processes/designs.

What to do now?

It's hard to imagine another Convertible Bond issue anytime soon with a 30-odd% drop in share price since the $2B issue in February. (BTW let's be clear that the Feb Bond issue was brilliantly timed, and it's what you should be doing with an impossibly high-flying share price.) Maybe issue more stock? Tesla has been able to do this without any dilution backlash, enabling them to repay DoE loans. A $5B raise is going to be tougher, and it's quite likely that Tesla will tap Round 2 of ATVM Loans in order to execute the next design. They are a reliable payer with a great deal of public support, but it is not a fast process nor a slam dunk.

So I guess what I'm saying is I don't think there will be a Gigafactory building batteries at a meaningful rate in 2017, nor a GenIII production line running full tilt in 2018. I'm not saying it'll never happen, but 12-18 months off of the date we've been using conversationally.

As Aha

they dont need whole 5G$, because it wont be tesla only, and I believe 5 is for full capacity, which they dont need at 2017, probably solar/wind crap is calculated in those 5 too which can be build later

Account Deleted

@Herman
I believe the 2B USD issue of Convertible Bond was made to finance the expected 2 billion USD that is Tesla's share of the 5 billion USD giga factory. A power point with the project is available here http://www.teslamotors.com/blog/gigafactory

So the finance part is a done deal at least with regard to Tesla but the other partners also need to find 3 billion USD. Moreover Tesla will need additional billions to fund the factory for their gen 3 Tesla. Their current factory is not big enough for producing both Model S, X and 500k units per year of the 3rd gen Tesla. I think Tesla can raise that money as well without any problem. After all they are past the most critical startup milestones having launched the Model S and already doing 3k units per month without any serious glitches. Moreover, their only true problem is their ability to ramp up production. There are no signs yet of demand restrictions for Tesla. Very unlike what the Nissan Leaf and the Volt has experienced.

However, I share your skepticism about Tesla being able to execute their plans at the scheduled time. It is nearly mission impossible to launch the 3rd gen Tesla by 2018 and be in full production with 500k units annually by 2020. They may be able to do it but what I seriously do not believe is that they can make a 200 miles EPA rated luxury BEV with hilarious acceleration and sell it for 35,000 USD. BMW or Benz can't even do that with a gasser so I think the price of that 3rd generation Tesla will end at 43,000 USD instead and it may not include free charging for life at Tesla's supercharger network that will span all of North America, Europe and Japan China by 2018. That will cost extra.

Roger Pham

Good point, Herman, regarding the massive investment in the Giga battery factory. "What to do now?" you asked?

What to do now is for Tesla to use their relationship w/ Daimler-Benz and Toyota to order existing 1-liter turbocharged engines to make PHEV's that will need only 10-15 kWh per car instead of 60-85 kWh per car. Those engines are already commercially available, so no major investment there. Tesla should have no problem hiring auto engineers who can work on the integration of the ICE with the electric drive train to make a PHEV.

In this way, the supply of the 2 billion NCA 18650 cells from Panasonic will last for quite a while and the Giga battery factory can wait until more cash flow from the sales of PHEV's and from more investors.

A PHEV with a 1-liter 3-cylinder turbocharged engine capable of 90 kW and a pair of electric motors of 45 kW each with a 10-15 kWh of battery surely can be profitable at $40,000 USD, because Ford and GM have done it! With Tesla's fabulous and super-ergonomic styling design and electrical powertrain, it (the Tesla PHEV) surely will be a major hit and will propel Tesla into the major league with perhaps sales of millions of unit yearly! All this w/out any sizable new investment at this time.

HarveyD

Logically, Tesla will probably produce more lighter, lower cost extended range BEVs models with 2-2-2 or 3-3-3 batteries by 2016/2018 or so followed by more improved BEV models in 2019/2020 or so.

The current S-85 super model could soon be replaced with the S-120 model with up to 400 miles range.

Will Tesla follow BMW's lead and use light materials to reduce overall vehicle weight by 30% or so and get more range with smaller battery packs? Taking 1000 lbs off can reduce the energy required and battery size by about 20% to 25%. Smaller battery pack also means less total weight to move. It is a win-win solution.

Darius

Roger Pham ,

Tesla PHEV canceled PHEV idea several years ago and they Musk definitely will not turn back. Two issue are limiting:

1. The lesser kWh in the battery results lower kW. The lesser kWh results in harsher cycling and dramatically affects lifetime. Making PHEV battery involves complicated battery chemistry optimizing therefore Tesla has no battery for PHEV and obtaining it quite different story.
2. The involvement of ICE makes design really complicated involving lot of traditional ICE maintenance. That would be even against supercharger network strategy.

I think traditional car makers GM and Toyota should try implement PHEV or EREV strategies more intensively and TESLA should be persistent on their strategy. Although for the moment no profitability and positive cash TESLA's approach is more viable than anyone's else on the market.

Roger Pham

@Darius,
1. I've analyzed and looked at the the potential of the Panasonic NCA 18650 batteries in existing Tesla Model S, and have concluded that 10-15 kWh pack will be able to supply 90 kW of peak power for quick acceleration and 15 kW continuous power for cruise. This battery chemistry has been tested by independent university and found to be capable of 5000 cycles at 90% DOD with only 18% of capacity loss at the end!

2. Absolutely NO ICE maintenance except for a simple oil change every few years with synthetic oil.
Current ICE needs no tuneup at all until 100,000 miles. In a PHEV, that would be 300-400,000 miles of driving after several decades, when the car will be so worn out that it must be replaced!

3. Incorporating the ICE into the PHEV can be very simple. Don't let anyone tell you otherwise! YOu 'll only need a pair of motor/generator of 45 kW each, with the ICE capable of 45-50 kW, preferably a 1-liter 3-cylinder turbocharged unit. No need for gear-shift transmission, because the pair of motor/generator can act as an electric transmission for the ICE, just like in the latest Honda Accord HEV/PHEV.
Tesla will simply purchase the latest Honda Accord HEV/PHEV and simply reverse-engineer this design into a future Tesla PHEV.

For the PHEV role, this Honda two-motor HEV/PHEV design is more advantageous than Toyota's and Ford's HSD design given more advance NCA battery chemistry. The Toyota's HSD design was advantageous at battery sparing, back when limited-capacity NiMh battery was used in HEV having only 1.3 kWh pack. HOwever, in a PHEV with 10-15 kWh pack, no battery sparing concern is necessary, and the Honda's 2-motor design is more simple, not patent protected, and will result in higher performance in the all electric mode.

4. Perhaps Tesla didn't hire the right kind of engineers when they canceled the PHEV idea. To those who only have hammers as tool, every solution appears to involve hammering nails!

If they only hire electrical engineers or mechanical engineers WITHOUT any experience into Automotive Internal Combustion engine, nor any experience into transmission design, then their decision to cancel PHEV plan was quite understandable!

Engineer-Poet

Putting an engine on board the car means the vehicle needs emissions certification, up to the end of the emissions warranty period.  This is an expense Tesla does not have and certainly does not want.

If Tesla wanted to go with a range extender, I bet they'd provide a means of pulling a generator trailer and deal with that separately.  That would keep the vehicle apart from anything involving fuels or combustion.

As Aha

Roger, can I get link to BS claim of "5000 cycles at 90% DOD with only 18% of capacity loss"?
my guess even if it capable of only 18% but its internal resistence(power loss) prabably will be even higher

Roger Pham

@E-P,

While it is true that emission certification fees from the EPA can be expensive to the tune of some millions USD per car model per year, when 10,000 units are built yearly, the cost divided over this many units will means only some hundreds of USD per unit. When 100,000 units are sold yearly, the cost per unit will be only some tens of USD.

Trailerable Extended range extender is not applicable for daily driving when the goal is to reduce the size of the battery pack on board in order to make 6-8 times as many vehicles for a given amount of battery available.

An onboard ICE that can apply torque mechanically to the wheels will halve the size of electric power train and will result in significant savings in production cost. For example, with 90 kW of turbocharged 1-liter 3-cylinder ICE, you will need only another 90 kW of electric motor to make 180 kW of total power. Ordinary daily driving will do fine with 90 kW of power on a 3,000-lb curb-wt vehicle. However, the 180-kW of power is necessary to command the status of luxury sport vehicle and hence the $40,000+ price tag in order to compete with the likes of Cadillac, Lincoln, Lexus, BMW, Mercedes...etc.

Now, to really out accelerate other entry-level luxury sedans, a two-speed automated manual transmission will be needed in order for the turbo to spool up to deliver the torque below 60 mph, but that can be offered on subsequent models or as an option.

The beauty of the turbocharger is that torque will increase proportionally with higher engine speeds while hp will increase with the square of engine speed to combat the aerodynamic force that increases as the square of the speed. For example, the car can cruise at 60 mph at 3,000 rpm and will do 120 mph at 6,000 rpm without needing gear change, which there may be no gear shift available. The engine torque will "keep on coming" with higher engine speeds. "Oh what a feeling!..." when the power keeps on coming, as you go faster and faster!

@As Aha,

I'm more than happy to provide the link to you:

http://mtrl1.me.psu.edu/Document/ZhangY_JES_2009.pdf

Note that this came from the prestigious Penn State University and not just an obscure "BS" college that you can easily discredit!

Herman

Anyhow back to the 8K...

They expect to spend $650M to $850M of CapEx in 2014. Almost all of this is factory related for S and X, Supercharger buildout and sales/service globally. No other new projects.

Combine that with the fact that (a) Tesla has almost always overshot expense and CapEx estimates, (b) they generate a very modest cash flow from operations, and (c) they will need to lay in a fairly significant inventory by end-of-year to support the “ramp-up” of Model X. This will take cash on hand down to about $1B at the end of ’14. This is far from sufficient to launch a combined GenIII and Gigafactory surge.

They will need another new raise, which, if done in the same fashion as the last, must pivot off of a significant rise in share value. With only $17M in non-GAAP earnings and $60M cash flow from Operations on a $713M gross revenue stream, the year has not started off in a way that encourages a run back through the mid-$200s.

Will Panasonic contribute? Maybe. But a $1B investment across the pond in a single-digit net profit business is a long putt, even for the low discount rate Japanese market. I think Tesla are masters at raising capital, but I see reliable bundler Steve Westly making a call to DoE to get the necessary total gathered. That doesn't get closed and authorized until after the election (at least a year away).

Finally from Deepak Ahuja on '14 R&D:
“in future quarters as we go towards the end of the year and potentially next year early as Model X development is behind us, I would expect some reduction in R&D spending, and then of course Gen III will pick up and other products that we start working…”

Translation: Real Gen III R&D START is at least a year away, and right on top of the Model X intro and learning curve.

Gen III will not find its way into buyers garages until 2019.

Roger Pham

@Herman,

Gen III will come whenever it will come. Right now, customers are very satisfied w/ Model S as they are, and will be perhaps even more satisfied w/ the coming Model X.

With the 2G battery deal with Panasonic, and assuming an average Tesla BEV car will contain about 6,000 cells, then the 2G number of cells will enable about 333,333 units! At a rate of delivery of about 30,000 units yearly, this 2G-cell-deal will last 10 years.

However, if Tesla will decide to do Gen III as PHEV, each w/ only 1000 cells each, then splitting the 2G cells into 1/2, with 1G cells going to PHEV, then Tesla can make 1 MILLION PHEV's, and can deliver as many as 200,000 PHEV's yearly, enough to propel Tesla into the Big League!

Assuming the same $ profit (or higher profit) for each PHEV sold in comparison to each BEV sold, due to the lower production cost for PHEV's having much less battery and 1/2 the electric power train, then Tesla will be able to make many folds more profit per # of cells down the line. The increase in cash flow will allow Tesla to be able to build the Giga battery factory much faster!

The PHEV model will be important ONLY if Tesla will ever want to break into the Big League with large production numbers yearly. Otherwise, Tesla is already very successful with BEV right now and may be safer to remain as a high-end producer of limited number but very high quality BEV's.

Engineer-Poet

In the PHEV arena, the existing majors with their extensive expertise in combustion drivetrains have a major advantage over Tesla.  Tesla is right to avoid competing with them head to head.

Herman

Roger, I think I have depended on the implicit point being clear, and it's not. My fault. Here it is restated.

The imminent introduction of a "mainstream", "practical range" (read 150-200mi), $30,000 BEV sedan has been an article of faith in the EV world for years. As late as 2010, Tesla execs were stating the car would show up in as a production item late '15/early '16. Then it became 2017 (at about the same time as the Model X moved from '13 to '14). Now while no year is being stated, we know that any serious engineering effort won't start until Spring of '15 at the earliest, pretty much coincident with the actual rate production of X, also moved out another year. That takes Gen III to 2018 IF Tesla is able to make financial sense of the project (which, BTW is now no longer being referenced as "half the price of the S"). I'm saying that "financial sense" will be much harder to achieve as the company produces only very modest financial results, and the self-fueled capital raising machine that depends on a very high multiple will break down.

Does that mean Tesla will collapse? Of course not. But the oft discussed Musk model of using the money from an exotic sports car to fund luxury cars to in turn fund a mainstream car is finally shown for what it really is: untrue. The Roadster never "made money", and the Model S in the net has not, either. Tesla has "made money" by raising it from investors in the original company, in the first issued shares, in subsequent issuances, and in bonds. When that engine is not running at redline, they cannot raise the funds to compete on a multi-hundred auto per year basis.

What this means for the industry as a whole: A delay to 2019-20 means that the perceived pressure on mainstream manufacturers to produce BEVs to the putative GenIII performance metric and market space is further reduced, the impetus to move past pure compliance vehicles is diminished, and continued improvement of ICE technologies and truly PRACTICAL electrification aimed at affordable idle elimination and braking recuperation will bring us to US CAFE standards without trauma.

As for Tesla's savior being a fuel-burning range extender: it'll never happen. Remember Musk's words of inspiration to his company and the press in 2012 "Here’s to creating the greatest car company of the 21st century, and to moving us off fucking oil as fast as possible". That guy will never, EVER put a fuel-burning device in a car with the Tesla badge.

Herman

"multi-hundred" should have been "multi-hundred thousand"

Herman

and thus my correction hangs in the air without the original comment, which has been deleted -- I don't understand but anyway will try to do the first one again.

HarveyD

Why should so many posters worry so much about Tesla producing successful BEVs and not competing with the production of HEVs, PHEVs and FCEVs?

Tesla is one of the best clean e-car manufacturer and will soon become an EV battery manufacturer for more vertical integration.

A Tesla FCEV may make sense for clean extended range models but Tesla already has an excellent extended range BEV with the S-85 model. The S-85 could/will be further improved with next generation batteries in 2017/2018 or so. Supplying free H2 stations to compete with its own free quick charge e-stations may break the bank.

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