After a slow launch, Tesla Model S sales are now exceeding the maker's forecast.
With sales of the new Model S battery-sedan exceeding initial expectations, start-up Tesla Motors says it will show a profit – its first ever – for the first quarter of 2013.
That should come as a shock to the large number of Tesla skeptics – including those holding more than 30 million shares short, anticipating that the batter-electric vehicle maker would suffer the same sort of short-circuit as California-based rival Fisker Automotive which last week put all U.S. employees on a brief furlough to save cash.
Tesla is still wrapping up its accounting process and didn’t release any specific numbers today – though it did emphasize the report wasn’t an April Fools Day joke. It claims it will have an operating profit for the first quarter to formally release in the coming weeks. That stands in sharp contrast to the $89.9 million it lost during the final three months of 2012 – a 10% increase from the fourth quarter of 2011.
Credit unexpectedly strong sales, according to the maker, customers snapping up about 4,750 of the Model S sedans. That was 250 more than Tesla had forecast and roughly double the fourth quarter sales total as Tesla continues escalating production at its factory near San Francisco.
Significantly, demand has focused on the two versions of the Model S with the largest battery packs, a 60 kWh sedan rated by the EPA at 208 miles per charge, and an 85 kWh version rated at 265 miles. Only 4% of buyers reportedly purchased the 40 kWh sedan leading the maker to say it will now cancel production of that $57,000 lower-range offering.
Even that version exceeded the range estimates of other battery-cars now on the market, such as the Nissan Leaf and Ford Focus Electric, so it appears to suggest that what potential EV buyers are waiting for is a vehicle that can come closer to the utility of a conventional gas-powered car.
Tesla has been trying to emphasize that capability and is setting up a network of so-called Supercharger quick charge stations in key markets along the East and West Coasts.
If landing its first profit weren’t big enough news, Tesla founder and CEO Elon Musk is hinting at still more to come, using his well-followed Twitter account to hint, “some may differ, but imo the Tues news is arguably more important,” referring to a promised announcement from the company tomorrow.
Considering its still small size, Tesla has been in the news a lot in recent months. Its poor showing for the end of 2012 came just days after it got locked into a battle with the New York Times over a review of the Model S sedan’s long-range driving capabilities – which it ultimately appeared to come out ahead in after a senior Times editor admitted mistakes were made by the paper’s reporter.
Tesla then announced it would push back the launch of its next product line, the Model X crossover utility vehicle, to late in 2014 — though its insisted the delay was the result of unexpectedly strong demand for the Model S.
Nonetheless, there have been plenty of short-sellers who were betting on continuing struggles to drive down Tesla’s share price.
The question is whether the maker can continue to surprise. If it can nudge production upwards to the promised 6,000 to 7,000 a month target, it is expected to boost earnings substantially, having already suggested its target is a margin of 25%, the sort of number most conventional automakers couldn’t even begin to imagine.
The downside would be to miss that target and play into the hands of the naysayers despite today’s positive announcement.