Tesla Motors delivered 11,532 vehicles in the second quarter of 2015, and produced a record 12,807 vehicles, exceeding plan (12,500 units) while improving efficiency, according to the company’s quarterly letter to shareholders. This represents a 15% sequential increase in production and a 46% increase from a year ago. Total GAAP revenue was $955 million (+24% year-on-year) for the quarter, while non-GAAP revenue was $1.20 billion (+40%). Net GAAP loss was $184 million (almost triple the $62-million loss in Q2 2014); non-GAAP net loss was $60.2 million (an almost 4x increase). Total Q2 gross margin was 22.3% on a GAAP basis and 23.4% on a non-GAAP basis.
Globally, Model S orders increased following the launch of 85D (earlier post) and 70D (earlier post). In the US, Q2 Model S orders grew almost 30% year-over-year. In Europe, Q2 Model S orders grew more than 50% year-over-year, despite two price increases in the past six months. In Asia, Q2 Model S orders nearly doubled from last quarter, helped by the initial success of a revised China strategy. Encouraged by this improvement, Tesla is increasing its investments in China by planning to grow this year from one to five retail stores located in high foot traffic areas.
Tesla now has 487 Supercharger stations globally and recently accelerated the pace of deployments suchthat one new Supercharger station is opening nearly every 24 hours. The company is also retrofitting sites with a new liquid-cooled charging cable to allow even faster Supercharging capabilities that it plans to introduce over time.
Q2 Results. Automotive revenue was $1.12 billion on a non-GAAP basis, and comprises GAAP Automotive revenue of $878 million plus a net increase of $242 million in deferred revenue and other long-term liabilities as a result of lease accounting. The average selling price of Model S declined during the quarter due to a product mix shift away from P85D.
Q2 Automotive revenue included $27 million of total regulatory credit revenue, of which $14 million came from the sale of ZEV credits. Q2 Automotive gross margin excluding ZEV credits was 23.9% on a non-GAAP basis and 22.9% on a GAAP basis. Non-GAAP gross margin was about 100 basis points below guidance, primarily due to higher manufacturing and part costs related to the ramp of our small drive unit line and the deferral of revenue recognition for certain Autopilot features which are now scheduled for release later this year.
Q2 Services and other revenue was $77 million, up 85% from a year ago. This includes about $32 million of powertrain sales to Daimler, $23 million of service revenue and $20 million of pre-owned Model S sales. Q2 Services and other gross margin was 2.2%, compared to negative 3.2% last quarter. The 540 basis points of sequential improvement was driven by production efficiencies related to powertrain sales and improved margin from services and merchandise sales.
Outlook. Tesla expects to produce just over 12,000 vehicles in Q3, representing a more than 60% increase from a year ago, and to deliver approximately the same number of vehicles as in Q2, despite having one week of planned shutdown in Q3. This includes a small number of Model X deliveries.
The company is now targeting deliveries of between 50,000 and 55,000 Model S and Model X cars in 2015—a slight hedging from earlier projections of a solid 55,000.
While our equipment installation and final testing of Model X is going well, there are many dependencies that could influence our Q4 production and deliveries. We are still testing the ability of many suppliers to deliver high quality production parts in quantities sufficient to meet our planned production ramp. Since production ramps rapidly late in Q4, a one-week push out of this ramp due to an issue at even a single supplier could reduce Model X production by approximately 800 units for the quarter. Furthermore, since Model S and Model X are produced on the same general assembly line, Model X production challenges could slow Model S production. Simply put, in a choice between a great product or hitting quarterly numbers, we will take the former. To build long-term value, our first priority always has been, and still is, to deliver great cars.—Shareholder letter
For 2016, Tesla is projecting a steady-state production and demand of 1,600 to 1,800 vehicles per week combined for Model S and Model X.
Tesla will begin production of Tesla Energy products this quarter at the Fremont factory, with a plan to ramp up production in Q4. As a result, it expects Q3 services and other revenue to grow modestly and gross margin to be comparable to Q2.
Tesla plans to expand Tesla Energy battery module and pack production at the Gigafactory in Q1 2016 on a more automated line, where construction remains on plan.
Operating expenses should grow roughly 5-10% sequentially in Q3, and 45-50% for the full year as the company invests in product development, including Model 3, and expands sales capability. The company still plans to invest about $1.5 billion in capital expenditures this year to expand production capacity, purchase Model X tooling, construct the Gigafactory, and expand stores, service centers and Supercharger network.