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Tesla Shares Surge On Surprise Second-Quarter Profit

Tesla Motors’ stock (TSLA) continues to climb — after the company reported a surprise second-quarter profit on Wednesday, the stock surged an impressive 13% during premarket trading the following morning. What that means is that the stock rose from about $35 dollars a share at the beginning of the year to about $153 as of the time of me writing this. That is some impressive growth.

The pioneering electric vehicle manufacturer reported earnings of 20 cents a share, excluding special items — pretty good considering that many prominent analysts had predicted a loss of 17 cents. 🙂

Tesla’s surprise profit was largely due to — according to them — record deliveries of the Model S and a “significant improvement in automotive gross margin.” Total income was 70% higher during the second-quarter than during the last, and a total of 5,150 Model S’s were delivered to customers.

And something to keep in mind is that, while the gain is certainly a plus, Tesla is currently in the process of expansion, profit is not their primary mission as of now. Until their plans for expansion are “complete,” profit will be taking a backseat. These plans include cracking the European and Chinese markets, increasing production rates, releasing their highly anticipated Model X SUV, as well as their “highly affordable” 4th production model, and installing a nationwide supercharger network.

During the second quarter, production rates did rise significantly — from about 400 vehicles a week at the beginning of the quarter to almost 500 a week by the end. Such production gains will be the “primary focus” in the near future, according to the company.

“The increasing rate of production and margin are even more compelling than the overall revenue and profit numbers,” stated Kelley Blue Book senior analyst Karl Brauer, as reported by CNN Money. “Tesla has clearly found an unmet market niche that’s capable of supporting the company, at least in the near term.”

Tesla provides more information about their plans:

We plan to open several more locations this year, including our first store in China. In the near term, we will slightly curtail the rate of stores openings in favor of more service centers, as it appears that simply increasing our service center coverage is sufficient to drive substantial Model S sales in any region that has a critical mass of Model S customers. We only opened 6 service centers in Q2, for a total of 47 globally, but will accelerate this dramatically in coming quarters and relentlessly focus on providing a level of service that is as close to flawless as humanly possible. As a result, service expenditures in the short term will rise, but we believe that this is the right thing to do for the long-term value of the company.

We are rolling out 120 kW Superchargers, which are 33% faster than our current version and can replenish half a charge in just 20 minutes, for free. Given the popularity of the Superchargers, we are expanding the size of some locations to enable charging of 10 to 12 Model S vehicles simultaneously. Over the next several weeks, our first European Superchargers will be placed in service with an initial focus on Norway, where we will cover almost 80% of the population of that country.

For those customers that desire even faster fueling, we recently announced an automated battery pack swapping capability. This option will allow a customer to swap in a fully charged battery pack in as little as 90 seconds, or about half the time it takes to refill a traditional car with gasoline. We intend to pilot this technology at a few of our Supercharger stations in California later this year, enabling travel between Los Angeles and San Francisco in less time, including stops, than a typical gasoline car.

While we expect production to increase from Q2, a considerable number of vehicles produced during the quarter will be in transit to European markets at the end of Q3. As a result, we plan to deliver slightly over 5,000 Model S vehicles in Q3, and remain on plan to deliver 21,000 vehicles worldwide for 2013. We expect that Q3 ASPs will rebound from the Q2 level as we deliver European Signature Series cars and demand for 85 kWh cars remains strong.

R&D expenses are expected to increase significantly in Q3 as we accelerate product development efforts on Model X, Model S right hand drive, and localization of Model S for international markets. SG&A expenses will also rise, driven by the growth in our retail locations, service centers and Supercharger facilities.

In related news, the futuristic Hyperloop project — designed by Tesla founder Elon Musk — will be be one step closer to reality on Monday, August 12th, when the project’s design will be released to the public to “invite critical feedback and see if people can find ways to improve,” as Musk himself put it.

The design plans will detail the somewhat bizarre-sounding project, one potentially capable of traveling 3-4 times faster than a bullet train.

As it stands now, though, the project is just hypothetical — Musk himself has no immediate plans to develop the project, and is offering up his concept for others to build on and perhaps develop the project.

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Written By

James Ayre's background is predominantly in geopolitics and history, but he has an obsessive interest in pretty much everything. After an early life spent in the Imperial Free City of Dortmund, James followed the river Ruhr to Cofbuokheim, where he attended the University of Astnide. And where he also briefly considered entering the coal mining business. He currently writes for a living, on a broad variety of subjects, ranging from science, to politics, to military history, to renewable energy.


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