Loss Tapers at Tesla as Its Sales Still Climb
Nearly 20 months after delivering the first all-electric Model S sedan to customers, Tesla Motors is narrowing its losses as sales of its cars continue to climb.
Tesla said on Wednesday that it lost $16.3 million, or 13 cents a share, in the fourth quarter, on revenue of $615.2 million. That compares with a loss of $89.9 million on $306.3 million in sales for the same quarter last year.
For the year, Tesla reported losses of $74 million on total revenue of $2 billion, compared with a $396.2 million loss on $413.3 million in sales in 2012, when Tesla began delivering its vehicles to customers.
But the automaker gave a rosy outlook on production and deliveries of its cars this year, especially overseas, which cheered investors.
“We expect to deliver over 35,000 Model S vehicles in 2014, representing a 55 percent increase over 2013,” Elon Musk, Tesla’s chairman and chief executive, and Deepak Ahuja, the chief financial officer, wrote in a letter to shareholders.
Last year, in its first full year of production, Tesla sold 22,477 of its Model S sedans.
It plans to produce 1,000 cars a week by the end of the year, up from its current rate of 600 a week. The supply of battery cells, though, will “continue to constrain our production in the first half of the year, but will improve significantly in the second half of 2014,” Mr. Musk and Mr. Ahuja wrote.
Shares of the stock, which closed at $193.64 at the end of trading on Wednesday, rose more than 10 percent in after-hours trading.
Tesla cautioned that it faced significantly higher capital expenses as it grows.
International expansion into Asia and Europe will be driving much of that growth, with combined sales in those regions to be almost twice that of North America by the end of the year, the company said.
Tesla said it planned to deliver its first vehicles to China this spring and “make substantial investments in China this year as we add new stores, service centers and a Supercharger network.”
“Based on current trends, it seems unlikely we will be able to satisfy demand in China this year,” Mr. Musk said in a conference call with analysts on Wednesday.
Also this spring, Tesla plans to begin entering right-hand-drive markets including Australia, Britain, Hong Kong and Japan.
Tesla said it expected to have prototypes of its second model, the Model X electric crossover utility vehicle, on the road by the end of the year and start delivery to customers in the spring of 2015.
“Model X demand is very high,” Mr. Musk said, “even though there’s zero marketing.”
The Model X could double Tesla’s total sales if the automaker introduces it in the next 12 months, said Karl Brauer, senior analyst at Kelley Blue Book.
“But the real potential for volume sales lies in the sub-$40,000 Model E compact sedan that’s rumored,” Mr. Brauer said.
Tesla executives declined to specify when the cheaper sedan might be developed but said the company would “very shortly” be ready to give details on the Tesla Giga factory, which will help the company cut the costs of its battery packs and accelerate its pace of innovation.
“With this facility, we feel highly confident of being able to create a compelling and affordable electric car in approximately three years,” Mr. Musk and Mr. Ahuja wrote.
Analysts echoed investors’ sentiments. “I think they’re in a good place,” said Efraim Levy, senior automotive equity analyst at S&P Capital IQ. “The big issue for the company is not so much execution but valuation. We’re bullish on performance.”
But as sales surge, Tesla continues to contend with concerns over fires that have broken out in several of its car batteries, and the safety of its wall chargers. In January, Tesla recalled about 29,000 wall chargers after the adapter, cord or wall outlet caught fire in an Irvine, Calif., garage. Then this month, a second garage fire, in Toronto, was reported, though it is unclear how it occurred. A Tesla statement to Business Insider, which first reported the Toronto fire, confirmed that it had taken place but did not specify a cause.
Tesla declined to comment on Wednesday.
Also, the National Highway Traffic Safety Administration is investigating the design of the Model S after its lithium-ion battery pack ignited in separate episodes in Washington state and Tennessee last year.
Tesla has increased the ground clearance of the Model S with a software update and said it would extend its vehicle warranty to cover fire damage.
At the North American International Auto Show in Detroit last month, Jerome Guillen, Tesla’s vice president for worldwide sales and service, underscored the high safety marks the car had earned, including a five-star crash rating from federal regulators.