Tesla Q4 2013 Earnings Call: 22,477 Teslas sold last year, Revenue Up, Losses Shrink, Share Price Soars

Yesterday afternoon, Californian electric automaker Tesla Motors [NASDAQ:TSLA] gave its official Q4 2013 earnings report, ending its 2013 financials in good shape.

Tesla Stock keeps on going up...

Tesla Stock keeps on going up…

Tesla reported a Q4 net income of $46 million, equivalent to $0.33 earnings per share using the non generally accepted accounting principles (non-GAAP) method. Using the generally accepted accounting principles (GAAP) method, Tesla made a loss of $16 million during Q4, equivalent to $(0.13) earnings per share.  The difference between the two accounting methods is partly due to the non-GAAP method accounting for future revenue gained from lease agreements entered into during Q4, while the GAAP method does not take this into account.

Using either method of accounting, Tesla managed to exceed its own Q4 target automotive gross margin of 25 percent. Essentially a measure of how much it costs to produce a Model S versus how much it is sold for, a high automotive gross margin means Tesla is making more money on every Model S it sells today than it was when the car first went into production in 2012.

In 2013, Tesla’s automotive gross margin grew due to several major improvements in the way it runs its Fremont production facility, economies of scale brought about by an increase in production volume. and small, evolutionary design improvements and manufacturing cost reduction on many Model S components.

European Tesla Model S

Tesla’s Model S sedan sold more than 22,000 cars last year.

Due in part to a series of improvements in the way Tesla’s Fremont production facility operates, economies of scale (more cars being made means a reduction in manufacturing costs per car) and various small evolutionary design improvements made to Model S components.

During Q4, 2013, Tesla managed to deliver a total of 6,892 Model S sedans worldwide, making a 2013 sales total of 22,477.  Those with a mind for figures may want to draw comparisons between the 22,610 Nissan LEAFs and 23,461 Chevrolet Volts sold in the U.S. last year — but we’d caution that the Model S is in a completely different segment to both of these more affordable plug-ins, and suggest that for true comparison, the Model S sales figures should be compared with that of the Mercedes-Benz S-Class sedan. Sadly however, we don’t have S-Class global sales figures to hand, but we’d hazard a guess that in the markets where Tesla sells, the Model S is providing healthy competition for the Benz.  (We do know the Model S, with what we calculate to be an estimated 18,000 domestic customers in the U.S. last year, beat the Mercedes-Benz S-Class Hybrid U.S. sales figures of 13,303 cars.)

Want to know how to get a Model S for just $10,000? You’ll need a time-machine…

For 2014, Tesla says it aims to deliver 35,000 Model S cars globally, representing a 55 percent increase in production over last year, with a production goal of around 1,000 cars per week by the end of the year. That won’t happen however, until Tesla has dealt with what it calls ‘supplier bottlenecks’: essentially a problem obtaining the amount of raw materials (and we presume battery cells) needed to make its cars.

That will change however in the second half of the year Tesla says, when it expects supplies to free up substantially. With its own plans to build the world’s largest lithium-ion recycling and manufacturing facility — nicknamed the ‘Gigafactory’ — pushing forward, we’d also suspect this is the last time Tesla will be substantially held back due to a lack of lithium-ion batteries. In addition, Tesla says, the Gigafactory will allow it to massively reduce the cost of battery pack manufacture and speed up its own innovation in battery cell technology.

Returning to Tesla’s revenue report for Q4, we note that Toyota and Daimler powertrain programs — producing EV drivetrains for Toyota’s RAV4 EV, the Smart ForTwo ED and Mercedes-Benz B-Class Electric Drive — netted a total of $13 million in revenue. Sales of regulatory credits accounted for another $15 million of revenue, but Tesla notes it did not sell any Zero Emission Vehicle (ZEV) credits in Q4.

Tesla CEO Elon Musk must have been thrilled with his company's progress in 2014.

Tesla CEO Elon Musk must have been thrilled with his company’s progress in 2014.

Moving forward, Tesla says its operating expenses and capital expenditure will increase this year, partly due to expanded Model S production, store investment and continued growth of its service and Supercharger network.  But R&D expenses will also increase as Tesla begins early design work on its third-generation car and puts the finishing touches to its Model X all-electric crossover SUV. That particular car, Tesla promises will finally hit the roads in final product design prototype form by the end of this year with customer deliveries promised in Spring 2015.  That’s substantially later than the original late 2013 debut originally promised by Tesla, but with sales on the up it looks as if very few people mind.

Shortly after the release of its full year 2013 Shareholder Letter, after-hours trading increased Tesla’s share price by more than 12 percent to $217, a full eleven dollar more than its previous $206 high during regular trading on Tuesday.

All in all, Tesla’s Q4 report appears to be finishing off 2013 in a good way: not only is it increasing its sales, production, and revenue, but it’s also getting closer to real profitability using the GAAP (rather than non-GAAP) method.

Are you impressed with Tesla’s performance this past year? What hopes do you have for the firm in 2014? Leave your thoughts in the Comments below.


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