Tesla Burns Through $620 Million, Loses $13,000 Per Car Made Ahead Of Model 3 Launch

Tyler Durden's picture

Traders were looking forward to today's "black box" earnings from Tesla as it would be the first quarterly report that combined Tesla Motors operations with a full quarter from cash-bleeding monstrocity SolarCity following the pair's merger, and would also provide much needed information about the "imminent" launch of the Model 3.

And, as usual, Elon Musk managed to fool those who were only focusing on the headline numbers, which were both good and bad: while TSLA missed earnings, reporting a (non-GAAP) 4Q loss per share of $1.33, or $215 million, far worse than the consensus estimate loss of $0.82. On a GAAP basis, the company reported a loss of $330 million, or $2.04 per share, compared with a loss of $283 million or $2.13 a share in the year-earlier quarter. This amount to a loss of over $13,000 for each of the 25,051 cars delivered in the quarter.

Now the good news: Tesla reported revenue of $2.70 billion, beating estimates of $2.56 billion. However, much of this "beat" was thanks to $214 million in "energy generation and storage" revenues.

Now on to the automotive business which was helped by a 69% increase in the sale of Model S sedans and Model X SUV during the quarter compared to a year earlier. Tesla reported 1Q deliveries of 25,051, the most ever, and said that the company's first half delivery outlook remains unchanged and hopes to deliver 47,000 to 50,000 deliveries, in line with prior expectations.

It provided the following discussion:

Based on our current order and production rates, our first half outlook remains unchanged at 47,000 to 50,000 deliveries, which represents 61% to 71% annual vehicle delivery growth. Moving past Q2, particularly as Model 3 becomes available, one of our challenges will be to eliminate any misperception about the differences between Model S and Model 3.

The company also added the following amusing clarification: "We have seen a belief among some that Model 3 is the newest and more advanced generation of Model S. This not correct.""

The most important question on everyone's mind: when will Tesla being production of the Model 3? The answer - (still) July.

Model 3 activities related to vehicle development, manufacturing equipment installation and supplier readiness remain on plan to start production in July.  We will provide guidance on vehicle deliveries for the second half of this year after we have started Model 3 production in July. Given that we will be ramping Model 3 production so quickly, as we’ve noted before, even a couple-week shift in timing can have a meaningful impact on total deliveries.

The bolded sentence suggests that the company is already hedging ahead of ucoming disappointments.

But most interesting was the following projection: "Simultaneously, preparations at our production facilities are on track to support the ramp of Model 3 production to 5,000 vehicles per week at some point in 2017, and to 10,000 vehicles per week at some point in 2018."

In other words, if all goes according to plan, Tesla will be make half a million Model S cars in 2018. Put us down for the under. Musk is betting the Model 3, a $35,000 four-door sedan, will broaden the company’s appeal and help increase production to 500,000 vehicles next year toward a goal of 1 million in 2020. Tesla made about 84,000 vehicles last year.

Below are the highlights from the company's outlook:

  • We will provide guidance on vehicle deliveries for the second half of this year after we have started Model 3 production in July. Given that we will be ramping Model 3 production so quickly, as we’ve noted before, even a couple-week shift in timing can have a meaningful impact on total deliveries
  • Non-GAAP Automotive gross margin should decline by about 250 basis points in Q2 due to the absence of the one-time benefit of Autopilot software revenue recognized in Q1 and fluctuations in product mix. At the same time, we expect that Model S and Model X vehicle costs should continue to decline each quarter based on the execution of our roadmap to improve manufacturing efficiencies
  • We expect Q2 GAAP and non-GAAP operating expenses to be flat to slightly up from Q1, including expenses associated with the final stages of Model 3 development and growth in our customer support infrastructure.
  • We expect that year-to-date capital expenditures will be slightly over $2 billion by the time we start Model 3 production. We expect additional investments through the remainder of the year as we increase automation and add production capacity.

Some more details about the company's cash flow: 

  • Q1 cash used in operating activities rose from Q4 2016 to $70 million, driven by record vehicle deliveries, as well as higher overall gross margin. The company generated $117 million in cash in Q1 after adding the cash received for vehicle sales to its leasing partners but classified in the financing section of our statement of cash flows.
  • Capital expenditures was $553 million in Q1, primarily for Model 3 and energy storage manufacturing capacity in Fremont and at Gigafactory 1, as well as for the expansion of customer support infrastructure.
  • During Q1, the company raised $1.22 billion in net proceeds from the sale of common stock and convertible notes, including the cost of a call spread that increased the effective conversion price of the convertible notes to $655 per share.
  • $4.0 billion in cash at the end of Q1 is the highest level of cash Tesla has had at quarter-end in our history.

What was not said is how TSLA generated this cash: as the chart below show, the drain of working capital as a source of cash, namely not paying vendors on time, has soared to a new all time high, rising to $2.1 billion for AP, and another $1.5 billion for accrued liabilities.

What will almost certainly not be discussed on the call is also the disappointing trend among Tesla customer deposits, which if anything shows that euphoria for the Model 3 is fading.

Finally, no matter how Tesla wants to spin it, the cash burn remains historic, and after the record nearly $1 billion in cash out the door in Q4, the company burned "only" $622 in freeh cash flow in Q1, the second most on record.

Meanwhile, the "narrative" continues, with Tesla's faithful hoping that one day Tesla will be able to finally become the luxury electric car "Amazon" and crush any potential competition, allowing it to flex pricing and unleash all those overdue cash flows. The only problem is that the competition, between BMW, GM, Porsche and countless Chinese luxury and mid-tier EV makers, is only just now ramping up.

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lester1's picture

A lot of QE money from the Federal Reserve ended up propping up Tesla. 

 

Crazy times we live in.

NugginFuts's picture

Let's do the math:

Selling 25k cars at a loss of $13k/car gives us a loss of $325 million in Q1 2017

Selling 500k cars at a loss of $13k/car gives us a loss of $6.5 BILLION in 2018.

 

Elon needs new maff skillz. 

hannah's picture

wrong math....

sell 25k cars at aloss of $13k but gov gives them $5billion dollar grant so they can pay out over $4billion in profits to the rich...win/win

NugginFuts's picture

You're right - I forgot the element of corporate welfare and outright theft. This business model is so effective they could lose a cool $1M per vehicle forever and still be "profitable".

Thought Processor's picture

 

 

 

It's ok, they're gonna make it up on volume.

Antifaschistische's picture

Do you think TSLA has a HUGE LEAP/PUT position in TSLA? 

I think that would be a prudent investment for maximizing shareholder value.

Save_America1st's picture

Tesla loses 13k per car and the car owner loses nearly all the rest is my guess. 

Who's out there buying used Teslas???  Probably not many and probably not for very much either.  And how's that trade-in value going on them for anything other than another POS (IMHO) Tesla???

 

HowdyDoody's picture

Tesla has a major carsh burn problem.

City_Of_Champyinz's picture

Hehehe i just love these Tesla reports!! Batshit insanity every quarter.

jimmy12345's picture

The headline is very misleading and anti-Tesla.   Tesla had a 27% gross margin for the quarter.  However since, they didn't cover SG&A and research costs they lost money.  The gross margin tells you much operating leverage and the ability of Tesla to be profitable.   The big oil companies obvious hate Tesla, so you have the negatively biased articles about Tesla.  No one on zero hedge mentions that how SpaceX is years ahead of the competion and is going to have the government billions on launch costs.  No one complains about ULA (a Boeing/Lockeed) firm ripping the government off for billions of dollars on launch costs.  

garypaul's picture

Can you please explain how SpaceX is years ahead of the competition? I know they can re-land a rocket for reuse, but that is just a circus trick. Meaning, it's not a safe and reliable method of landing, and it does not produce any great benefit other than looking neat (wouldn't a simple parachute be far easier?)

 

jimmy12345's picture

The cost of the propellent in the rocket is $150,000 for a launch that SpaceX charges $60 million;  99% of the cost in the rocket launch is for the rocket itself, so if you reuse the rocket multiple times, you dramatically lower launch costs.  Costs for a completely resuable rocket would be about $1 million instead of $60 million (ULA charges a $100 million at the minimum currently).   Costs for airtravel would be extremely expensive if everytime you flew the airline threw the aircraft away, so it easy to see how reuse can dramatically lower costs.    

garypaul's picture

Thanks for providing some figures to back up your claim. However, you still haven't addressed the simple question of why you would want to reland a rocket in the manner that SpaceX does it. A parachute would work too.

It takes a great amount of fuel to land a rocket like that on earth. That's why I call it a circus trick. By the way, the rockets that you're refering to (the ones that were contracted by NASA), did they have have that reverse landing thing, or did they land in the conventional manner?

jimmy12345's picture

SpaceX and NASA already tried a parchute but it wasn't very economical to refurbish a rocket once it fell into the ocean.   "It takes a great amount of fuel to land a rocket like that on earth."  As explained previously the cost of fuel is neglible to cost of the rocket and reducing the cost of launch by 99% it a breakthrough in the space launch industry.   SpaceX and Tesla have the best engineers in their respective industries.   

 

Generally, NASA, the Air Force, and private companies only care that SpaceX launches their payload to orbit and do care what the do with the rocket once their payload has been launched successfully.   

jimmy12345's picture

SpaceX and NASA already tried a parchute but it wasn't very economical to refurbish a rocket once it fell into the ocean.   "It takes a great amount of fuel to land a rocket like that on earth."  As explained previously the cost of fuel is neglible to cost of the rocket and reducing the cost of launch by 99% it a breakthrough in the space launch industry.   SpaceX and Tesla have the best engineers in their respective industries.   

 

Generally, NASA, the Air Force, and private companies only care that SpaceX launches their payload to orbit and do care what the do with the rocket once their payload has been launched successfully.   

garypaul's picture

No no, you keep missing what I'm saying. I said a great amount of fuel, not great cost of fuel. Fuel can be anything, like kerosene or corn alcohol (super cheap) etc.. The point is you can only fit so much of it onto the rocket, it's a limiting factor.

peippe's picture

the funniest part is : what if the landing on Mars goes wrong & the rocket topples?

where's the gantry to right it & "reuse"?

that's what I thought. : )

EmployedMillenial's picture

we'll make it up on volume damn it!

Hitlery_4_Dictator's picture

I wish I was smart enough to implement that awesome and efficient business model of losing money by selling a product that sometimes starts on fire. 

American Psycho's picture

He's trying to stay out of a high tax bracket.  He'll probably make it up in volume.

SARCCCCCCC

Hitlery_4_Dictator's picture

OK I have to tell this story again because it's so funny.  I used to own a Saleen Mustang and would go this monthly car show about 2 years ago.  There was always this douche who showed up in his electric car, the Fisker Karma, LOL. This mid 40's nerd would pop his collar and get out and do nothing but wait around his car to try to show off.  He never looked at any other cars there. I would always walk by and say loudly, "yikes paid a lot for a car where the company no longer exists to service it, ouch." **This was right after Fisker declared bankrupty after screwing the taxpayers.  And then I would just walk away. He always would look confused and then a tad upset.  He finally stopped coming.  LOL

 

To me Tesla is nothing more than a giant Fisker Automotive.  All aboard the pain train. 

Squid Viscous's picture

nice ride....

i had a pontiac G8 GT, turned about 400 hp "at the prop" after a few mods,

oh the abuse I dished out...

Hitlery_4_Dictator's picture

My Friend had a G8 GXP, he loved that thing

Freddie's picture

Bob Lutz bought the assets of Fisker with some investors and they took the bodies and dropped gas engines in them.  He liked the body design.

Hitlery_4_Dictator's picture

Bob Lutz must be senile because that car, and the one he created are the ugliest thing ever produced.  The new gas one is even uglier....Look at the Fisker Mustang, behold the ugliness

 

https://assets.wired.com/photos/w_1720/wp-content/uploads/2014/11/fisker...

Freddie's picture

He is a cool old guy but his eye for design of car bodies is not great.  Viper etc are circus looking cars.  The V8 Destino from VLF designed by Fisker is better looking.  It looks like a Maserati rip off/

The guy I respect is Christian von Koenigseeg.  He build his super car company out of nothing.  They were using AMG engines but I think he builds his own now.

Dame Ednas Possum's picture

Ugly is a trait of just about every American car ever made.  

Ugly, bad handling, crappy fuel efficiency and shitty resale. 

 

 

HooRAY4rSIDE's picture

That one looks like it's begging to be fed a Milk Bone dog biscuit.

HooRAY4rSIDE's picture

Chrissakes ~ This morning I needed to make a stop at my local general store to buy a stupid item.

 

I pull up in my Ford 1991 F-150 XLT Lariat and there's some brand spanking new car in front that looks like it was just dipped in sticky candy apple sauce.

 

Usually, I'm in & outta there in 30 seconds, but this time, I had to wait 5 minutes while the guy made him a fucking breakfast sandwich.

 

Egg ~ bacon ~ english muffin ~ slice of cheese... Rang him up ~ $2.88... So the fucking douche paid $2.88 for a sandwich that costs 25 cents in ingredients for that he could have made at home in 2 minutes because it was all made in a microwave (& waited 5 minutes for it & made me wait)...

 

So I pull out ~ fucking TESLA (this candy apple shit car that has no possible goddamned chance in hell of outlasting my '91 Lariat), with out of state plates.

 

That's your slice of American Pie these days... It's not possible for global warming with all the fucking snowflakes.

 

 

Schlump's picture

Wow, you're so full of stupid and hate! Must suck to be you.

HooRAY4rSIDE's picture

Yeah ~ I hate having to wait 5 minutes at the counter while some douche has a $3 sandwich made for him that he could have made in one minute at home for 25 cents.

Uchtdorf's picture

I'd give the federal government $100 of my hard-earned cash to bailout Tesla on the condition that I never had to hear or see Elon Musk again...oh, and all the bureaucrats who ever gave him gubmint money in the past will also have to move to Syria, to a bombed out city, without services, and they must go without weapons.

yogibear's picture

Is that why all the Fed presidents are driving Teslas.

Burnbright's picture

That cash flow looks like a real winner!

Juggernaut x2's picture

Who in the hell is buying these things with gas at $2 a gallon- I never see one anywhere on the roads in Chicago area

dilligaff's picture

I see a lot of them in AZ and from what I understand, there's tons in CA.  Another thing that pisses me off is they give these cars "Alternative Fuel" license plates so they can drive in the HOV lanes whenever they want.  So, the fuckers aren't paying any gas taxes that are used (supposedly) to maintain the highways, and then they get to drive in the HOV lanes by themselves.  Makes me want to buy a shitty old truck and run them off the road!

NurseRatched's picture

The $620 million is cash flow burned up should be a lot worse - their Accounts payable and accrued liabilities jumped $465 million. If they would have paid their damn bills timely than cash flow would have been negative by over a billion dollars.

One billion dollars pissed away in 91 days. A tip of the hat to the man! That takes some stones!

dilligaff's picture

Don't forget, a large portion of their "revenue" is from the CA Carbon Tax Credits scam.  Take that out and they'd have lost a shit ton more!

NAVIGATOR0832's picture

Government bailout

lance_manion's picture

"We will make it up in volume."  - E. Musk

curbyourrisk's picture

In other words..   declining margins...  I mean negative margins...   Anyone got the bell curve on optimal production vs. optimal pricing?

jimmy12345's picture

Tesla's gross margin  for the quarter was a positive 27%, so they can indeed make a profit by selling more vehicles.

Winston Churchill's picture

Warranty work and provision is not in their COGS.

It should be, and I for one would love some detail on what those costs really are.

Trust me, thats where he hiding big problems.Been there and done that, you can hide the truth much longer than you think.

Be nice to see the number of batteries bought and compare that to his actual production numbers.

jimmy12345's picture

Warrenty expense is in Tesla's COGS.  Per Tesla's 10-K "Warranty expense is recorded as a component of cost of automotive revenue for Automotive related sale and cost "

GestaltNine's picture

they probably should have tried to make a lasting business as a luxury niche thing 

Old Muppet 1's picture

Fool's.  All Musk has to do is talk about space and all the algos get horny.  TSLA $1,000.

I am Jobe's picture

Wow, waiting for the battery folks in Nevada to be laid off. Time to shore up some cash 

Tapeworm's picture

Doesn't Nevada seem like the wrong place to place such an intense electricity user? Gee, they could have put it in a disused aluminum plant in the Northwest where electricity is cheaper and will be there when Lake Mead goes dry.