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Elon Musk: Tesla has made it through the ‘valley of death’

Ucilia Wang — Mon, 05 Nov 2012 18:45:51 +0000

Tesla Motors has hit its scaled-back production and delivery goals of its Model S electric car. The company said Monday that it has achieved an annual production rate of 10,000 cars per year, or 200 cars per week, and delivered 250 Model S cars after producing nearly 350 of them for the third quarter.

Back in July, executives at the electric car company had expected to ship about 500 Model S cars in the third quarter and 5,000 overall in 2012. In September, Tesla acknowledged that it was lowering that goal to making 300 cars and delivering 200 to 225 because it was four to five weeks behind schedule.

Tesla has had no problem attracting reservations for the Model S, its second model and one that it hopes will generate profits, but it needs to crank up its factory to mass produce the car. Tesla CEO, Elon Musk, said back in July that the company’s pace of producing Model S should hit 20,000 per year by the end of 2012, and on Monday he said the company should hit that milestone in the next four to five weeks.

The company, which delivered the first Model S in June this year, now expects to deliver 2,500 to 3,000 Model S in the fourth quarter and over 20,000 in 2013.

“Several months ago, I said that the coming several months will be a test for Tesla as it goes through the valley of death. I feel as though we’ve made it through that valley at this point,” Musk told analysts during a conference call about the company’s third-quarter earnings on Monday.

The company’s first model was a luxury sports car called the Roadster that costs over $100,000. The Model S starts at $57,400 (without counting the $7,500 federal tax credit). Tesla went public in 2010.

As a young carmaker, it’s not surprising to see Tesla running into manufacturing challenges, which include correcting mistakes in cars that just rolled off the assembly line and changing component suppliers. And that was the basis of some questions from analysts during the conference call. Musk said most newly built cars require some work to correct “minor issues,” including ones that involve the aesthetics of the car, and said those issues aren’t something average consumers would notice. He added that he was not aware of any supplier issue that would prevent the company from getting to the annual production rate of 20,000 cars.

“We are seeing a rapid decline in the number of issues that needed to be corrected from vehicles coming off the line,” Musk said.

How well the company can manage the expectations of investors and the public also will be critical for the performance of its stock, which rose over 8 percent to $31.31 per share in recent trading.

Here are highlights from the third-quarter financial results:

Revenue: $50.1 million, up from $26.7 million in the second quarter but down from $57.7 million from the year-ago period.

Losses: $111 million, or $1.05 per share, compared with $105.6 million, or $1 per share in the second quarter and $65.1 million, or $0.63 per share, from the year-ago period.

Roadster update: Tesla shipped 68 Roadsters in the third quarter and expects to do “a decent business” selling used Roadsters now that the car has been out for a few years, Musk said. Tesla has a staff dedicated to managing the used Roaster business.

Retail operation: The number of showrooms and service centers in the U.S. grew by 30 percent during the third quarter. The showrooms — and word of mouth from satisfied customers — are primary ways for Tesla to publicize its cars. The company doesn’t spend money on advertising. Tesla also plans to use the reservation system to sell cars for a while versus selling a car on the spot to anyone who walks into its showroom.

Musk said Tesla may be able to do that starting in 2014, but his vice president of sales and marketing, George Blankenship, played down that possibility by telling analysts that the on-the-spot delivery “is not even a goal. The goal is to have a reservation system so that we can build a car specifically for you.”

Model S cancellation: Now that Tesla has started Model S delivery, it’s telling customers who signed up early on to convert their reservations to non-refundable orders. That has caused some customers to drop out. The cancellation rate for those who have been contacted by Tesla is about 10-15 percent, said Tesla’s CFO, Deepak Ahuja. The company had over 13,200 reservations in the third quarter.

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Tough six months ahead for Tesla

Katie Fehrenbacher — Mon, 13 Aug 2012 15:37:19 +0000

The next six months could be one of the hardest times in the life of eight-year-old electric car company Tesla Motors. Tesla CEO Elon Musk admitted as much at the National Clean Energy Summit last week in Las Vegas, and said:

The challenge that Tesla faces over the next few months is scaling production enough to achieve a certain gross margin on our product so we can be cash flow positive. That’s extremely important. If we’re unable to do that, we’ll enter the grave yard with all the other car company startups of the last 90 years.

Tesla just started delivering its electric sedan, the Model S, in late June to its first customers and it’s got about 12,200 reservations for the Model S. But Tesla plans to produce and deliver 5,000 of these cars before the end of the year. The plan is to ship roughly 500 of the cars in the third quarter of this year, with the remaining thousands of cars to be delivered in the fourth quarter.

That’s like the Monster Truck version of ramp ups: totally extreme. And Tesla has to do that dramatic ramp up without making any major production mistakes — major recalls on the cars could be a killer. The Roadster had a few part recalls, and Fisker suffered similar problems with production of its Karma car. It’s not uncommon for startup automakers (or even large automakers) to face such production glitches.

Ramping up more slowly could mean delays for deliveries of the Model S, which in turn could deliver a drop off in the reservations. Tesla did see a significant amount of cancellations when it delayed delivery of its first car, the Roadster, by many months.

Tesla also has to do this production ramp up and, like Musk said, also achieve a gross margin on the cars to reach profitability in 2013. Tesla’s business plan rests on breaking even on the Model S.

Musk said at the summit:

It’ll definitely be a very tough road over the next 6 months. We can’t afford to make a lot of mistakes. If we don’t make too many mistakes then we’ll get to that period and we’ll be able to bring out larger volume cars that are more affordable.

Musk isn’t unfamiliar with tough times at Tesla. When Tesla was getting the Roadster out the door, there was a point where Musk had to personally fund the company and Tesla was dangerously close to being out of money. This time around, Musk has more access to funds (his own and investors) and experience, so if he made it through the first time, odds are he’ll be able to pull it off this time around. But still, the electric car pioneer has a rough time ahead for the rest of 2012.

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Tesla needs to gear up to meet Model S shipment goal

Ucilia Wang — Wed, 25 Jul 2012 23:05:52 +0000

The first Model S customer is driven off

Tesla Motors needs to make a profit and is counting on the Model S to get it there. The electric car company began shipping the sedan in late June and the hoopla surrounding the rollout has boosted the Model S reservations to about 12,200 now, compared with roughly 11,500 by the end of June.

“We obviously don’t have a demand problem. One of the biggest reasons people don’t put down a reservation payment for Model S is you have to wait a year, and if you need a car you need a car,” said CEO Elon Musk, during a conference call with analysts to discuss the company’s second-quarter earnings.

Tesla expects to ship a total of 5,000 Model S in 2012, but the big delivery push won’t happen until the fourth quarter. The company plans to ship roughly 500 of the car in the third quarter and the rest before the year ends. In 2013, Tesla plans to ship 20,000 of the Model S.

Analysts questioned whether Tesla could ramp up so quickly and do it without glitches, given the short period of time it will have to accomplish it. Musk said it’s not unusual for a new car to have a low production rate at the start. Plus, the company continues to trouble-shoot problems. It already has had to change one supplier and replace an interior trim that looked good in a sample but not so swell when it showed up inside a car, he added.

Musk offered assurances of the company’s production ramp up by saying that he expects the annual production rate of Model S to reach over 20,000 by the end of 2012.

“At the end of next year, there is a pretty good likelihood that we will be at the 30,000 per year runrate,” he added.

Tesla is building some kind of “super charger” station, a project Musk had hinted previously, and on Wednesday he suggested that the company will unveil it in September, depending on whether Tesla could finish the construction and secure all permits. The station is supposed to add 150 miles of charge to Tesla cars in 30 minutes. He remained mum with the details of the project but promised a showstopper.

“I’m really excited about the announcement. It’s way cooler than anyone realizes,” Musk said. “I’ll have a profound effect on how the public sees electric vehicles. There will be a few surprises.”

Here are the details about Tesla’s financial results:

Revenues: $26.65 million, down from $58.17 million from the second quarter of 2011.

Losses: $105.6 million, or $1 per share, compared with $58.9 million, or $0.60 per share, in losses from the year-ago period.

Model S: Ship 5,000 of the Model S during 2012. About 500 of them will be delivered to customers during the third quarter and the rest in the fourth quarter. The company was rolling off the assembly lines five cars per week back in June, and it has since “approximately doubled” that pace.

Roadster: 89 Roadsters were sold during the second quarter. Another 130-140 Roadsters are left and should be sold by the end of 2012.

Guidance: Tesla expects to generate $560 million to $600 million in revenues for 2012. In 2013, the company expects to ship at least 20,000 Model S and achieves a gross margin that will “exceed 25 percent,” Musk said.

Powertrain project: Tesla announced a powertrain development program for Mercedes-Benz earlier this year, and it began to record revenues from the project during the second quarter. Asked how Tesla’s powertrain compares with competitors’, Musk said, “I think Nissan should double down on their electric vehicle investments to improve their product; it’s not where it needs to be.”

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Ups and downs for cleantech in Q1

Mon, 16 Apr 2012 06:55:41 +0000

The year 2012 may be remembered in the cleantech space as one of both hope and disappointment. Electric vehicles from the plug-in Prius to the Mitsubishi i to the long-awaited Tesla Model S rolled out, but disappointing sales mean the market may not have caught up to innovation. Acquisitions and investments chugged along in the smart-grid market, with Landis+Gyr’s acquisition of Ecologic Analytics and the anticipation of a Silver Spring Networks IPO that has not yet materialized. Meanwhile the quest for the low-power server continued in the green data-center space with AMD’s purchase of SeaMicro for $334 million. We examine these events and others in this report, which also provides a near-term outlook of trends and companies that will be important to watch in 2012.

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Tesla’s Model X could make the electric SUV a hit

Katie Fehrenbacher — Fri, 10 Feb 2012 05:48:55 +0000

This week electric car company Tesla Motors unveiled an advanced prototype of its third car, the Model X. The SUV-minivan hybrid is one of the world’s first all-electric minivans, and Tesla decked out the car with innovative design features that, along with a relatively affordable price tag, could attract a truly mainstream audience. Simply put, the world’s least-cool car just got hip, green and sporty. This research note examines the details of the Model X and why Tesla will be the brand to watch in the electric vehicle market.

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12 tech leaders’ resolutions for 2012

Tue, 31 Jan 2012 17:14:37 +0000

Lose your love handles, call your mom more often, get that promotion: If you’re like many of us, you’re already thinking over some New Year’s resolutions that will make you a better “you” in 2012. But how are the tech industries’ thought leaders approaching the new year? We asked 12 of them for their resolutions and published those from Dec. 27, 2011, through Jan. 7, 2012, on gigaom.com. We have bundled them together here in a single document for the convenience of our valued GigaOM Pro readers. Be sure to check back over the coming months for further thoughts and advice from some of the tech industry’s most well-known names. Companies mentioned in this report include Sprint, Facebook and Amazon. For a full list of companies, and to read the full report, sign up for a free trial.

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Fisker won’t ramp up production of Karma until Q2 2012

Katie Fehrenbacher — Wed, 09 Nov 2011 17:09:53 +0000

Updated: Electric vehicle startup Fisker Automotive dramatically scaled back production plans of its first car, the Karma, in the fourth quarter of 2011, and it won’t ramp up to full production until the second quarter of 2012. That was the word from Fisker’s battery supplier, A123 Systems, in its third-quarter earnings call on Wednesday.

As a result of this “dramatic” and “sudden” reduction in Karma volume for A123′s batteries, as A123 execs described it in the call, A123 Systems had to lower its fourth-quarter and year-2011 guidance by $45 million. The entirety of that year-guidance cut seems to be coming from the sliced Fisker deal, and Fisker was A123 System’s largest revenue-generating transportation deal.

A123 Systems even had to cut both temporary workers and cell production for Q4 because of the Fisker volume reduction. A123 Systems quietly released the drop in guidance in the late afternoon last Friday, but it gave more details in its earnings call on Wednesday.

In the third quarter of this year A123 actually ramped up battery production to meet Fisker’s previously set production goals. Update: Fisker had to scale back its work with A123 because of the delay from the federal and state certification process, which Fisker expected to happen earlier, Fisker told me. I’m speculating, but it sounded like other suppliers potentially didn’t meet their production targets for the Karma, which is not so uncommon in the electric auto world. Because electric cars are so new, there are a limited number of suppliers.

Update: Fisker says it is busy ramping up production during Q4 to reach full run rates early next year. “The fact is that we have sufficient inventory of batteries at the plant currently to deal with our production plans, given that we did experience some delays due to regulatory issues. Therefore, we are not in need of more battery stocks at the present time,” says Roger Ormisher, the director of global communications at Fisker.

Fisker received federal and state certification for its Karma just last month and shipped almost 40 Karmas to the U.S. from its partner’s factory in Finland. Some of the first customers have received theirs — like investor Ray Lane and celebrity Leonardo DeCaprio — and the other cars were shipped to dealers as their first demonstration units.

A lot of industry watchers probably aren’t surprised by this. Fisker has delayed the launch of the Karma by months and years. It is a difficult task as a startup to get the first line of cars built — just ask Tesla, which struggled with the launch of the Roadster, too. Battery maker Ener1 placed its bet early on in the all-electric Think City car, and when that company went bankrupt, it practically took down Ener1 with it (the company was just delisted from the Nasdaq).

I’m surprised that with all the previous media attention from right-leaning media on how Fisker is using the Department of Energy loan to build cars in Finland (it’s not, the loan is mainly for its second car to be produced in the U.S.), more people aren’t paying attention to the real numbers and real issues with the company. If you’re just learning about Fisker, here are 10 things to know about it.

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Tesla: First Model S cars coming no later than July 2012

Katie Fehrenbacher — Wed, 02 Nov 2011 22:26:14 +0000

Customer rides of the Model S Beta

If you get over the fact that electric car pioneer Tesla Motors will lose money every quarter for almost another year, then you can relax and realize that Tesla actually had a pretty solid third quarter, which the company detailed in its earnings release on Wednesday. Tesla said its revenues were up and that it will ship its first Model S cars to customers “no later than July 2012.”

Tesla generated revenues of $57.67 million for the three months ended Sept 30, 2011, which was up from $31.24 million from the same quarter a year earlier. Tesla also raised its full year revenue guidance slightly to between $195 million and $200 million, up from its previous guidance of $180 million to $190 million. In after hour trading Tesla’s stock rose almost 5 percent to $30.10.

Customer rides of the Model S Beta

However, along with higher revenues, Tesla also naturally lost more money, as the company continued development of commercializing its Model S and Model X cars. Net loss for the quarter was $65.08 million, which was almost double its net loss for the same quarter a year earlier of $34.94 million. Tesla has been transparent about how it will need to spend this money to launch and start selling the Model S and Tesla said its capital expenditures for the year would be at the lower end of its guidance of between $220 million and $245 million.

Tesla also still has a decent amount of cash reserves on its balance sheet of $334 million and it still has $240 million left to draw down from its loan with the Department of Energy. Tesla has $574 million “in available capital resources.” It will need all of that to cover its costs as it moves into launching its second car Model S and third car Model X.

Tesla CEO Elon Musk says the Model S is essentially sold out for 2012, and Tesla eventually also intends to bring back the Roadster brand for a future car, likely built on the Model S platform. Watch our Model S Beta ride video (below), and check out the Model S Beta at our RoadMap event on November 10th in San Francisco.

Watch this video for free on GigaOM

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Tesla’s Roadster to return in 2014

Katie Fehrenbacher — Thu, 27 Oct 2011 18:59:23 +0000

Electric car maker Tesla Motors will soon stop manufacturing its inaugural car the Roadster — its deal with Lotus, which supplies Tesla with the car body, was only for 2,500 cars. But now, according to reports, Tesla plans to bring back the Roadster brand in 2014 for a redesigned car that will be based on a new platform, which will likely be a tweaked version of the Model S platform.

Happy day for any of you that oh-so wanted a Roadster back in the day but didn’t get in line or have the funds. The Model S is Tesla’s second car that was designed as an electric vehicle from the ground up. It’s battery lies low and flat on the underside of the car. In contrast the original Roadster uses the Lotus body converted into an electric car. I think electric cars that are designed to be EVs from the start could do a lot to show buyers the unique benefits of electric cars.

Tesla Roadsters lined up outside of the Model S Beta Customer event

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Tesla to build 100 more Roadsters to meet demand

Katie Fehrenbacher — Fri, 01 Jul 2011 17:53:26 +0000

By now, you’ve probably heard that electric car maker Tesla is ending its run with its inaugural car the Roadster. I reported back in May that in December 2011 Tesla planned to end production of the Roadster, and Tesla CEO Elon Musk has said in interviews recently that potential buyers only have a few months left to purchase the cars. But Tesla also quietly has entered into a deal to buy another 100 gliders from Lotus to produce the Roadster, according to a filing, enabling Tesla to continue selling the Roadster in the first half of 2012.

Tesla VP of Communications Ricardo Reyes told me in an interview that Tesla has purchased another 100 gliders from Lotus “to meet excess demand,” for its Roadster car. Given Tesla’s original deal with Lotus was to buy 2,400 Lotus gliders for Roadsters (now it’s at 2,500), the 100 additional cars “is not a small number,” pointed out Reyes.

However, Tesla never intended the first run of its Roadster, which is built off of the body of a Lotus but with Tesla’s technology inside, to be more than a limited-run car. The idea was to use the Roadster to prove the market for a high-end sporty electric car, and then move onto a more mainstream car that Tesla would build from the ground up. “The Roadster did its job admirably,” said Reyes. As of March 31, 2011, Tesla had delivered around 1,650 Roadsters, leaving approximately 750 vehicles left to sell, plus this 100 more.

Tesla’s Model S sedan is supposed to hit the market in mid-2012, and Tesla is now in the process of moving from the alpha build phase to the beta phase for the Model S. Tesla says the Model S will be one of the world’s first EVs with a 300-mile battery range.

Another good reason for Tesla to sell some more Roadsters: It has a revenue gap coming between the finale of the Roadster and sales of the Model S. 100 Roadsters is about another $10 million in revenue — yes, a small number, but anything helps.

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