If you’re wondering how an upstart automaker that lost $74 million last year has a stock price hitting records above $200 per share, look no further than Tesla Motors’ fourth quarter and full year ’13 investors’ call on Wednesday.
“Great quarter,” one Wall Street analyst exclaimed at the end of his question-and-answer moment with chairman and CEO Elon Musk and chief financial officer Deepak Ahuja. Plenty of Wall Street analysts’ congratulations abounded.
Indeed, Tesla had an exceptional Q4 in ’13, claiming a record 6892 Model S cars sold and delivered and automotive gross margins of 25 percent, none of it revenues from zero-emissions-vehicle credits sold to other companies.
It posted a net loss of $16.3 million for the fourth quarter (vs. -$89.9 million in Q4 ’12) and a loss of $74 million for ’13 (vs. -$396.2 million).
Tesla closed at $193.64 per share Wednesday but reportedly jumped to well over $200 per share in after-hours trading following the investors’ letter release. The company reported $610.9 million in gross auto sales revenues for the fourth quarter of ’13 (up from $294.4 million in the fourth quarter of ’12) and gross revenues for ’13 of $1.998 billion, up from $385.7 million.
Tesla delivered 22,477 Model S cars last year, up from about 2600 in 2012. “We expect to deliver over 35,000 Model S vehicles in 2014, representing a 55+ percent increase over 2013,” says Tesla’s shareholder letter. Musk said much of the brand’s sales increase going forward will be from foreign markets, including China, where he expects tobeat North American sales by approximately 2:1. Tesla’s Beijing, China, retail outlet is already the brand’s biggest store.
Meanwhile, Tesla Motors will hold a conference call next week to detail its Giga factory, “which will produce all the [lithium-ion battery] cells needed,” Musk said. The Giga factory fed speculation about some sort of collaboration with the computer giant Apple, which fueled Tuesday night’s stock rally. The San Francisco Chronicle reported last week that Musk met in spring 2013 with Apple’s mergers and acquisitions chief, though Musk didn’t mention that company in the presentation Tuesday.
Tesla’s Fremont, California, factory, formerly of the Toyota-General Motors joint venture NUMMI, will soon get a second product, the Model X, and later a third product, called the “third-generation” car.
“We expect to have production design Model X prototypes on the road by [the] end of the year and begin volume deliveries to customers in the spring of 2015,” the investors’ letter says. Musk said he expects the X to be a higher-volume car than the S, which is obvious considering that the X is to be priced closer to $40,000. Meanwhile, Musk expects the options mix, and thus the average transaction prices, of the X to decrease as the car ages.
“The third-generation vehicle will have an entirely different production process,” allowing higher, more efficient numbers, Musk said. Under GM and Toyota, the Fremont-NUMMI plant’s capacity was about 420,000 vehicles per year.
One Wall Street analyst asked whether Tesla demand suffered after a couple of high-profile Model S fires were covered in late 2013 and early January.
“As consumers saw this was a media-driven thing … [they] became more aware” that electric cars have far less propensity to catch fire than gas-powered cars, Musk replied. The “path for consumer understanding,” he said, was via social media and the Internet. The bottom line is you can fight people who buy ink by the barrel with enough Twitter followers and Facebook fans.
So what to make of Tesla Motors’s annual report, in all its low-key exuberance? [You can’t listen to Musk answer such questions and not think “low-key.”] While it’s hard to think of a $16.3-million loss as a “great quarter,” Musk & Co. seem to be plugging away at growing its highly valued brand. He’s learning about auto production and the vagaries of product development at a quick pace, while Wall Street fawns over his 25 percent profit margins and his healthily green, apparently benign business plan. Believe it or not, Elon Musk is more humble and his Tesla Motors is much more mature than it was a couple of years ago, when the Model S was named Automobile of the Year. If Tesla Motors continues to thrive, it will be in spite of a fawning Wall Street.