Tesla's Good Day: Stock Soars on "Full Profitability" Announcement

By · April 01, 2013

Tesla Model S

The Model S has been selling in bigger-than-expected numbers. (Jim Motavalli photo)

Tesla Motors stock has been on a roller coaster, send down by the sight of a Model S on the wrong end of a tow hook in a New York Times story. It's now been buoyed considerably—up more than 22 percent at one point Monday morning, to $46.47 a share—by reports that the company had sold more cars than expected (more than 4,750 instead of 4,500 in the first quarter) and will achieve “full profitability” in the period.

“Profitability is what makes a company real,” Musk said in a statement. “Tesla is here to stay and keep fighting for the electric car revolution.”

Big Announcement Coming

That’s not even Tesla’s big news. On Tuesday, Tesla is supposed to clarify this Elon Musk tweet: “Really exciting @TeslaMotors announcement coming on Thursday. Am going to put my money where my mouth is in a major way.”

Profitability won’t come any too soon for Tesla, which has been operating on a razor’s edge. On the fourth quarter of last year, it went through $60 million. Losses for the last three months of 2012 totaled $75 million, on sales of $306 million. Revenue doubled to $413 million in 2012, but negative cash flow also doubled, according to USA Today.

The company has now sold approximately 10,000 cars, including the now-discontinued Roadster. The Model X crossover (built on the S platform) is in the pipeline, but delayed until late 2014. Investors still love the company, and that helped Tesla stay afloat by raising $212 million last October.

Of course Musk, whose fortune is estimated at $11 billion, isn’t likely to let Tesla fail. I’m guessing it’s over the hump at this point (unlike rival Fisker, which is calling in the bankruptcy lawyers), but I could be wrong. The bottom line is that Tesla has something that Fisker doesn’t—a really, really great car. I would love to own a Model S, and all of my car-loving friends and colleagues feel the same way.

Big Customer Benefits

Tesla also sneaked in a few new announcements—it won’t produce the $59,900 40-kilowatt-hour battery version of the Model S, because very few customers (four percent) opted for it. Instead, 40-kwh customers will get 60-kWh cars with the battery capacity limited to 40 kWh by software. Most of those people are likely to convert their cars to 60 kWh, since it’s more than likely an easy tweak. The conversion will cost $10,000, which is the price difference between the 40-kwh and 60-kwh cars, says Tesla's Shanna Hendriks--nobody's getting a bargain here. The lesson: people will pay more to banish range anxiety.

And all 60-kwh cars will be built with 480-volt Supercharger capacity, making it included (as on the 85-kwh cars) rather than the $2,000 option it was. Since use of the expanding Supercharger network is supposed to be free forever, this is a nice Easter surprise.

Comments

· · 1 year ago

Great point -->

"The lesson: people will pay more to banish range anxiety."

I've been saying this all along (and I'm far from the only one), though the folks who drone on about how "inefficient" it is to carry around extra battery weight that's rarely used continue to ramble on (Hint: no one's listening, at least not 95% of Tesla's customers).

BTW, the same argument could be made for the "extra" weight of a gasoline engine in a Volt, i3. If that "range-extender" is rarely, if ever, used, it = largely dead weight. Though, strangely, I rarely see anyone make this argument.

· · 1 year ago

I will pay more to banish range anxiety, but only if I can budget for more. That's the catch. What does your budget allow? The Model S for me is a good example. I can stretch my budget to buy a 40 kWh Model S, but not the 60 kWh version. With Tesla nixing the 40 kWh option, the Model S is back off the table for me. I would certainly prefer to have a larger battery, but even the 40 kWh Model S is pushing the limits of any reasonable new car budget, including my own. In the meantime, I hopefully look forward to a more reasonably priced model a few years from now.

· · 1 year ago

I can't recall any car company startup turning profitable in recent times. This is impressive.

Tesla is also starting a new 66 month lease program, where you have the option to sell the car after three years with a residual tied to the value of a Mercedes S Class. You can see that here:

http://www.teslamotors.com/true-cost-of-ownership

I guess the 60 and 80 kWh people will be subsidizing the battery cost for the 40 kWh people who don't up convert.

· · 1 year ago

Kudos to Tesla!

· · 1 year ago

IMO it would be wise for Nissan to take heed of how Tesla eliminated models that are not capable of Level 3 quick charging. Make CHAdeMO standard on all trims, it's a relatively inexpensive addition that makes the car worth so much more.

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