Tesla’s Model X Lags But Big Plans Still On Track
Electric car maker Tesla Motors revealed in its earnings on Wednesday afternoon that it has been struggling to ramp up production of its new electric SUV, the Model X, but it’s still on track to significantly grow the amount of cars it will make this year. In addition, Tesla said it will still unveil and deliver its next low cost car the Model 3 on time.
After delivering only 206 of its Model X cars in the fourth quarter of 2015, Tesla said that in January the company had decided to limit production of the SUV at the factory for an undisclosed period of time in order to maintain “quality production standards,” and make production of the car more efficient.
The company said following those efforts, Tesla has been able to increase production of the Model X. Tesla said it hopes to get close to making 1,000 Model X cars per week by the second quarter of the year. Tesla CEO Elon Musk clarified on the earnings call that the company will likely be on track to make on average 700 to 800 Model X’s towards the later half of the second quarter.
Tesla (TSLA) said it expects to deliver 16,000 cars, both the Model S and the Model X, in the first quarter of 2016.
By comparison, in the last quarter of 2015, Tesla delivered 17,478 vehicles to customers. The dip in deliveries shows how hard it’s been for the company to grow production of the Model S and the Model X at the same time in the same quarter.
Tesla described its production of the Model X as “lower than expected,” and said that the slow growth and added expenses and burdened the company’s overall auto margins.
On the earnings call, Musk said that it had been a mistake, or “some hubris” as he put it, to try to launch so many new features in the first version of the Model X. In hindsight, Tesla should have rolled out new features to the Model X car over later versions and across multiple years, said Musk. Musk also described the last couple months as “quite excruciating,” but he said he thought the company was through the worst of the struggles.
However, despite the Model X lag, Tesla said it still expects to deliver between 80,000 to 90,000 new Model S and Model X vehicles in 2016. That’s in line with what the company has previously stated for its goals for car shipments in 2016. Previously Tesla said it planned to deliver 1,600 to 1,800 cars per week in 2016 (which comes to about 83,200 to 93,600 cars for the year).
Tesla says the company is also still on track to unveil and deliver its next low cost car, the Model 3. Tesla says it will show off the car for the first time at an event on March 31. It’s still unclear whether that “reveal” will just be images, or an actual prototype of a car. Tesla plans to make and start shipping the car in late 2017.
In addition to the growth of Tesla’s car deliveries, the company said its grid battery business is still seeing very high demand. These batteries can be plugged into buildings, the power grid or solar panels, and help utilities maintain the grid or enable solar energy to be used at night.
Tesla said inbound sales leads of its battery business are “quickly exceeding” the inbound sales of its vehicles.
These growing businesses will enable Tesla to be “net cash flow positive and achieve non-GAAP profitability for the year,” said the company. In addition, the company is expecting “moderate GAAP profitability” in the fourth quarter of 2016.
Tesla said all of these efforts required $1.6 billion in spending, including $411 million in the fourth quarter of 2015. Tesla plans to spend another $1.5 billion on its plans this year. Major expenses include design of the Model 3, construction of the battery factory outside of Reno, Nevada and expanding its retail stores.
Last year Tesla generated revenue (GAAP) of $4.05 billion, which compared to $3.20 billion in 2014. At the same time, Tesla’s net loss soared in 2015 to $888.66 million, compared to $294.04 million in 2014.
Tesla’s stock jumped 11% to $160.05 in after hours trading on the revenue growth and prediction of profitability.