The morning after Tesla Motors unveiled its plan to build Superchargers around the world (complete with Skrillex music and theatrical light show), the electric car company also quietly cut the forecasts for the short term production of its second electric car the Model S, as well as its yearly revenue guidance. Tesla says it has “increased our Model S production at a rate slower than we had earlier anticipated,” and thus are “approximately four to five weeks behind our previously announced Model S delivery goals as of the end of 2012.”
As of September 23 Tesla says it’s made 255 Model S cars and delivered 132 Model S vehicles to customers. Tesla only recognizes revenue on the delivery of vehicles to customers. Tesla says it has produced 34 cars for marketing and engineering purposes, and the gap between proeuced and delivered also is due to the fact that it tkes some time to make sure the cars are ready before shipping them to customers.
Tesla now estimates that it will make 300 Model S cars in the third quarter, and deliver 200 to 225 of those to customers. Tesla says it can get to a weekly production rate of 400 Model S vehicles before the end of 2012, which could lead to between 2,500 to 3,000 cars made in the fourth quarter. Tesla still anticipates it can get to its previously planned a production rate of 20,000 Model S vehicles in 2013.
Before this change in its estimates, Tesla previously had planned to produce and deliver 5,000 of the Model S cars before the end of the year, shipping around 500 of the cars in the third quarter of the year, and the remaining thousands of cars to be delivered in the fourth quarter. The fourth quarter was going to be the real crunch time for Tesla, as I pointed out in this article in August.
Alongside the the downgrade of its short term production targets, Tesla has cut it revenue forecast for 2012 to a range of $400 million to $440 million, down from its prior outlook of $560 million to $600 million. Tesla now expects its third quarter revenue to be in the range of $44 million to $46 million, and says its gross profit margin in the third quarter will now be in the range of negative 15 percent to negative 18 percent. By 2013 Tesla is hoping its gross margin reaches 25 percent.
Still Tesla’s Model S reservations are high — the company has 13,000, minus its deliveries. “The third quarter has been the strongest quarter in our history for new Model S reservations, totaling more than 2,600 to date.”
But at the same time, Tesla said it asked its first several thousand customers on its reservation list to configure their cars for delivery or risk losing their production slot — and as a result about 1,000 customers cancelled their reservations. I’ve asked Tesla if I’m reading that right and will update this if not. They said they adjusted that 2,600 net reservations in Q3 to 1,600 reservations. Tesla says in the filing: “We expect the cancellation rate to decrease after we work through the older reservations on our list and there is less of a gap between a customer placing a reservation, configuring the car and receiving delivery.”
As I wrote in August, this is going to be one of the hardest two quarters in Tesla’s history. If the company manages to scale up production of the Model S, meet its new production and delivery targets, and also meet its planned path to profitability, it’ll be smooth sailing for Tesla in 2013. Tesla’s stock dropped close to 7 percent in morning trading.
Tesla also revealed in its filing that this month it entered into an amendment with the DOE to push back some payments of its loan, and also says it will seek more amendments of its DOE loan. Tesla says:
- The Sept. DOE agreement “removed our obligation to comply with the current ratio financial covenant for the third quarter of 2012.”
- The Sept. DOE agreement, “amended our funding requirements for the dedicated debt service reserve account to [both] postpone until February 15, 2013, $14.6 million of the $28.8 million pre-funding payment originally due on October 15, 2012; and [also] make additional pre-funding payments, beginning June 15, 2013, of between $14.2 million to $14.5 million each quarter to pre-fund the quarterly principal and interest payments due from September 15, 2013 through December 15, 2014.”
- The Sept. DOE agreement also “Added a covenant requiring us to work in good faith with the DOE to develop an early repayment plan for our outstanding DOE Loan Facility on terms satisfactory to the DOE.”
- Tesla also says “Based upon our current financial forecast, we currently anticipate that if we do not raise the proceeds anticipated from this offering and do not otherwise adjust our operations accordingly or amend the DOE Loan Facility, we may not be compliant with the current ratio covenant for the quarterly period ending March 31, 2013. For the quarters ending September 30, 2013 and December 31, 2013, we currently anticipate that without taking advantage of additional revenue opportunities or making adjustments to our spending, we expect that we will need to seek an amendment from the DOE to modify the fixed charge coverage ratio covenant. Moreover, we currently anticipate that without raising capital in addition to this offering, we would need to seek an amendment from the DOE to modify the total liabilities to stockholder equity covenant for the quarter ending March 31, 2014 and the two subsequent quarters.”