Tesla Still Rocking It — 2014 Breakdown
Originally published on EV Obsession.
The folks at Tesla aren’t stupid. They know what to highlight to make a point. The first sentence in the 2014 4th quarter & full year shareholder letter Tesla published last night reads: “Tesla continues to drive the global transition to sustainable transport, with more pure electric car revenue than all other companies combined in 2014.” Wow. That puts some things into perspective.
Of course, the Nissan LEAF was the top-selling pure-electric car, but at a much lower price, and with buyers not jacking up their vehicles’ prices by ~$50,000 with added features or better performance, the news from Tesla isn’t actually that surprising. Still, it shows one thing: Tesla is pulling in a lot of money, and is the big dog in the electric car market.
The next sentence: “From 2012 to 2014, Tesla non-GAAP revenue grew by almost 800% and GAAP revenue grew by almost 700% while gross margin simultaneously increased to unusually high levels by automotive standards. Moreover, as implied by the graph below, both vehicle production and demand are expected to accelerate in 2015.”
Production will clearly ramp up almost continuously if demand increases and battery or other supply bottlenecks are not an issue. Demand is very likely to jump a great deal when the Tesla Model X is finally released. With nearly 20,000 reservations on the books, it’s clear that Tesla’s amazing and record-shattering Model S has given a lot of people the trust that the Model X will rock. However, dropping several grand on a vehicle that has been delayed for years still can’t be the norm. Once the Model X hits showrooms and the first reviews roll in, demand is just going to get that much stronger. I think it’ll blow away Model S demand and be a big next step in the world of electric vehicles.
Still, the news a lot of people held onto was that Tesla was down about $108 million in the 4th quarter on a GAAP basis (or $16 million on a non-GAAP basis), and I imagine that’s why Tesla stock (TSLA) dropped very quickly in aftermarket trading.
The good news for anyone who is long Tesla or really wants to see Tesla continue on the awesome track it has been on is that there are a lot of good and unique reasons for that. Tesla spent two paragraphs at the end of the first page of the shareholder letter discussing some of those — reasons why 1,400 cars planned for December weren’t shipped until 2015 (buyers away on holiday, ships not working, extreme weather, etc., etc.) Also worth noting is that Tesla has been putting a lot of money into Model X R&D and production preparation as well as Gigafactory construction and massive expansion globally (i.e., in Asia, Australia, & Europe), all of which are capital investments that will pay off eventually barring a force majeure.
Back to the numbers Tesla really wanted to highlight, here are some big ones:
In 2014, we also increased our number of stores and service centers by over 40%, expanded our Supercharger network by 400%, started construction of the Gigafactory and introduced numerous advances on Model S. As a result of this progress, we entered 2015 with over 10,000 orders for Model S and almost 20,000 reservations for Model X.
And then there’s also the Supercharger expansion. A record 125 Superchargers were installed in the 4th quarter, bringing the total up to 380 worldwide.
The full letter is worth a read, imho, with Tesla discussing the excited reception the Model S P85D received from the auto journalism world as well as normal people (something we have covered probably a dozen or more times by now) and the increase in orders that has resulted but will come about more and more as the masses are actually able to test drive the P85D.
With a number of interesting factory improvements, Tesla aims to get production up to about 2,000 vehicles a week by the end of 2015.
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“Still, it shows one thing: Tesla is making a lot of money, …”
Instead of “a lot of money”, are they are actually yet making any money? They have revenue, but considering the stage they are in business do they actually have profits? From missing P/E ratio I would guess not.
They are making A LOT of money. And they could have a lot of profit if they wanted to. But the large profit they have (and even more than that) they choose to invest into expanding production, markets and to grow as fast as possible.
No. “Having significant revenue” is not same as “making a lot of money”. They do not yet have any profit, small or large. They may have high cross margins for products, but have invested heavily. It is important to use appropriate terms, based on publicly available data.
This is not saying that they shouldn’t be investing as much of revenue as possible for growth, and forgo profits for now — of course they should. Amazon has done that successfully for a long time. Nothing wrong with that. And in due time Tesla hopefully will become profitable company.
I just wanted to point out that it is good to use precise terms when discussing financial situation that is all.
Otherwise it is too easy for advocates to incorrectly quote reporting, and claim (for example) that “Tesla is highly profitable” — based on mis-reading of reporting.
sorry, adjusting the language to “pulling in.”
for the broader point/context of profit: a ton of capital investment in the future is holding back profit, but the amount of money Tesla makes on an individual car is excellent, and the demand for these wonderful vehicles is certainly going to make the investments worthwhile, imho.
when you look at the full picture, it’s very hard to find any fault with what Tesla is doing.
Amazon has technically ‘never made any money’ either. Look at what they earn vs. what they spend every single year.
This new business model is better because you’re always investing in the future and staying sharp. Companies get ruined when shareholders demand too much.
You don’t need to put the word ‘technically’ in there. Amazon has lost money every year of its existence. Investors put money into Amazon in the hope that it will eventually make money.
tigerwoods of cars ceo !
There’s some semi-fishy stuff in the results, like the 1400 delayed deliveries. If so, then why is the guidance only 9500 deliveries for Q1 2015? That’s only 8100 more. As Elon said himself, the notion of Tesla’s own sales team suggesting charging difficulties in China “sounds brain dead”.
It’s understandable why investors are worried about the slightest hint of demand limits, because the stock is currently priced as if Tesla will sell 300-500k cars/yr at decent net profit. The results also imply a significant loss in the next quarter.
Tesla’s Disappointing 4th Quarter Comes Packed With Excuses
http://www.forbes.com/sites/michelinemaynard/2015/02/11/teslas-disappointing-4th-quarter-comes-packed-with-excuses/
“The electric car maker posted a loss of 13 cents a share during the last quarter of 2014, excluding some items, and said it missed delivering 1,400 cars in December.”
Tesla loses $108M in Q4, upbeat about 2015
http://www.usatoday.com/story/money/cars/2015/02/11/tesla-earnings-sales-stock/23240599/
“For all of 2014, the maker of electric luxury cars reported, it lost $294 million, vs. a loss of $74 million for all of 2013.
…
Tesla said development of the Model X utility, which could boost sales significantly, “remains on plan for initial customer deliveries starting in Q3.”
However, the original plan had been to have it out first quarter of last year.”
In the end, that 2014 loss equals only ~1% of Tesla’s market cap, and much of it would be erased if Tesla’s total revenue was counted.
The bulk of the stock’s value (~80%) is based on expected future sales of $15-20B/yr. It’ll take highly anomalous Model S sales to infer anything about that, and that seems unlikely.
A 10x more important factor than this loss is whether an investor thinks the recently confirmed Chevy Bolt will steal a lot of Model 3 sales. So the stock will remain highly speculative for a long time.
If the Leaf won’t steal 3 sales, nor will the Bolt…
I doubt any brand of EV will steal sales from any other brand.
I think it more likely that the synergy of all advertising, discussion, and first hand experience driving/riding in one will make sales higher for all.
I don’t really agree with that, at least in the context of my point.
Tesla benefits financially by being the only good EV manufacturer. It makes it easier for them to sell at a higher margin, to stand out from the crowd, to retain their image of technological superiority, etc.
It’s clear that some people who would’ve waited for the Model 3 will choose the Bolt instead, as it’ll be released sooner and probably cost less. How many will do so, and how Tesla needs to react with pricing, are the questions.
It’s obviously too soon to know what prices will be but what I’ve seen to date is that the Bolt will be $30k after the federal subsidy and the Model 3 will be $35k before the federal subsidy.
If that’s how it turns out then the M3 will be $2,500 cheaper than the Bolt.
But I take prices this far out with a grain of sand.
What I’m watching to see is whether GM is building the Bolt with a “Tesla attitude”. Will they build a really great mid-range car or will they put an electric motor in an economy car body?
I have the same question about the Toyota FCEV. It’s going to sell close to the cost of the low end Model S. Will it have the luxury features or will it be a Camry with a fuel cell?
And will either GM or Toyota start thinking about customer service similar to Tesla? Will they be willing to upgrade cars already sold, for example?
I think the two biggest components to the “Tesla attitude” are performance and charging network. If GM slacks on either one, then they won’t be in the same class as Tesla (same with next-gen Leaf), and cross shopping will be limited.
As for the Mirai, it’s said to have an upscale interior, but it’s too slow and too limited in refueling infrastructure for a premium experience. It poses zero threat to Tesla.
Don’t discount the way Tesla treats customers.
Any other car company asking customers for desired improvements and then acting on it?
Tesla has called back sold cars for repairs. GM and other manufacturers don’t even inform customers of known problems.
A few big components were left out. Service. Over the air updates. Immediate high quality fixes by engineers instead of letting the lawyers and accountants hash out “acceptable” solutions – or even to admit there was a problem. Constant updates that allow existing users to have access to new features. Repairs that are not treated as a local business’ profit center, but as a manufacturers mistake to be corrected as seamlessly as possible.
The biggest component is that this is an additive process that has allowed the newest car company to pass all existing car companies in customer satisfaction with their process.
Yes, there actually need to be many more EV options to help satisfy the specific needs of buyers who have not yet made the switch. As more EVs are seen on the road, more people will understand the tech is ready and when they look into it will understand it is significantly better than ICE mobiles.