The darling of automotive stock speculators – electric vehicle maker Tesla – posted a yearly loss of -$74 million on revenue of more than $2 billion during 2013, compared with a -$396.2 million loss on $413.3 million in sales in 2012.
The stock is trading at record levels of above $200 per share given the revenue increase, and with the company promising to increase it yet again during 2014.
During 2013, Tesla sold 22,477 of its Model S sedans, which cost $650 million to develop. Net income was $46 million during Q4, which calculates to $0.33 EPS, resulting in a loss of $16 million or -$0.13 earnings per share. (See Cadillac ELR debuts in January at $75,995. Tesla Killer?)
However, positive free cash flow was $40 million in Q4. Cash on hand increased to $846 million on 31 December 2013, as Tesla generated $130 million of operating cash flow (cash from operations less capital expenditures). Tesla continues to maintain that it is on a strong growth trajectory and has become something of an anti-car company in the minds of investors, and that is a good thing in the stock market.
Tesla claims that more than 80% of its customers are now using their Model S EV as their primary vehicle, and the resale value of the few cars on the road remains high (duh – supply v demand). The Toyota and Daimler powertrain programs contributed only $13 million of revenue in the quarter. Q4 sales also included $15 million of regulatory credits revenue, but no zero emission vehicle (ZEV) credit sales.
The first Model S deliveries in China are scheduled for this spring. Tesla claims it plans to make “substantial investments” in China this year, adding new stores, service centers and a recharging network. Already, the Beijing store is said to be the largest Tesla retail location in the world as the Tesla promotional machine keeps running on overtime.
AutoInformed thinks that the initial investment costs will far outrun profits in China, but we will see. Consider this honest assessment from Elon Musk to shareholders, “Operating expenses and capital expenditures will increase significantly in 2014, as we plan to invest in the long term growth of Tesla. We plan to expand production capacity for Model S and Model X [a crossover SUV], invest in our store, service and Supercharger infrastructure, complete the development of Model X and start early design work on our third generation car.”
Tesla predicts it will deliver 35,000 Model S vehicles in 2014, a +55% increase compared to 2013. Production is expected to increase from 600 cars per week now to about 1,000 cars/week by end of the year. Battery cell supply continues to be a problem, though, and remains so during the first half of the year. Tesla claims it will improve significantly during the second half of 2014. Expansion into right-hand-drive markets such as the United Kingdom, Japan, Hong Kong and Australia will start this spring.
The Chinese pricing strategy is also an expensive gambit. The price for a Model S in China is the same as the price for a Model S in the US, adding only hat Musk terms are “unavoidable taxes, customs duties and transportation costs. We are taking a risk with this strategy, because it is counter to prevailing auto industry practices. Still, we believe it is the right thing to do. It also means that in China the Model S is priced [~$70,000 to $100,000] comparable to a mid-sized premium vehicle, instead of a large luxury vehicle.”