Tesla Motors Earnings: Elon Musk Tackles the Doubters

Jim Motavalli

Jim Motavalli | Aug 09, 2013

Elon Musk loves an audience, and a chance to talk about his company’s stellar financial performance. He got both Wednesday night, during Tesla Motors’ earnings call for analysts. It’s great to see how he barely holds himself in check. Asked about the recently unveiled BMW i3 city car, even over the phone it was clear he was struggling against an impulse to say something dire.

Elon Musk: The other carmakers have "room for improvement." (Jim Motavalli photo)
Elon Musk: The other carmakers have "room for improvement." (Jim Motavalli photo)

“There is room to improve upon the i3, and I hope they do,” he said, before both he and the questioner broke out laughing. Quickly sobering up, he added, “I really do encourage other manufacturers to bring electric cars to the market. I wish it were going faster than it is.”
Tesla doesn’t need to take potshots at other EVs (as it once did with such relish against arch-enemy Fisker), because it now has such a positive story to tell. In its shareholder letter, Tesla predicted that, thanks to new markets in Europe and Asia, it could reach an annualized sales rate of 40,000 vehicles by late 2014. From April to June, Tesla made 20 cents a share (excluding one-time write-offs and stuff like that), a better performance than last quarter and surpassing expectations. Net income, in that accounting, was $26.3 million.

The stock closed Thursday at an I-wish-I-bought-it $153 a share. The company now has a market cap bigger than Peugeot and Fiat combined, they say -- even more than the whole U.S. coal industry.

The results were helped by Tesla's sale of California’s zero emission credits to other automakers. Tesla is building nearly 500 Model S cars weekly. There are now 13,000 Teslas on the road, and the cars are selling at a rate of 20,000 a year, with a 2013 sales goal of 21,000. “Forty thousand is a pretty safe number to assume, and we see a potential upside from there,” Musk said. He said the European market (launched this week with shipment of cars to Norway) is potentially the same size as the U.S., and China—beginning with a showroom in Beijing later this year—is possibly larger in terms of Tesla sales.
Indeed, Musk is still talking about reaching 500,000 cars and trucks annually, which explains the company’s recent purchase of additional land at its already cavernous production facility (the former NUMMI plant) in California.
Musk said Tesla is on track to produce its next-generation mass-market car, which is targeted at $35,000 before any incentives. “I don’t see obstacles, I see a fairly clear path to that vehicle,” he said. “There’s a huge amount of work to do, but I think we can create a compelling car with 200-mile range.” If he does that, and it’s in the high $20,000s with incentives, maybe Tesla really can make 500,000 cars a year.

The Tesla Model S: Aiming to conquer Europe and Asia. (Tesla Motors Photo)
The Tesla Model S: Aiming to conquer Europe and Asia. (Tesla Motors Photo)

The key, Musk said, is moving beyond the early adopters and convincing the mainstream to consider electric cars. “The traditional model doesn’t apply to Tesla,” said Chief Financial Officer Deepak Ahuja on the earnings call. “We are slowly increasing our presence.”
Tesla, Musk said, started out very dumb about making cars, and is now less dumb. He complained about supplier bottlenecks, pointing out that consumers can’t take delivery of cars that are 99 percent complete. He vowed to have those straightened out in the next six months.
A must-have market for Tesla? Japan. “A lot of American companies don’t take the Japanese market seriously, but we will,” said Musk. “I would consider it a great honor if the Japanese would buy our car.” Read the shareholders' letter here to get the full picture. And if you want still more analysis, watch this video:

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