Bloomberg News

Tesla Loss Seen Widening Ahead of Model S as Roadster Ends

February 15, 2012

(Updates analyst estimates in fourth paragraph.)

Feb. 14 (Bloomberg) -- Tesla Motors Inc., the maker of battery-powered cars run by entrepreneur Elon Musk, may have seen its loss widen in 2011’s final quarter as it wound down production and sales of $109,000 Roadster electric cars.

Tesla’s Model S sedan, intended to expand the Palo Alto, California-based company’s sales volume with a base model priced at $57,400, won’t go into production until mid-2012. Until then, Tesla’s main revenue source is supplying battery packs and other components to Toyota Motor Corp. and Daimler AG, two of its investors.

“We do expect the roll-off of the Model S to be a headwind to contend with until later this year,” Amir Rozwadowski, a New York-based analyst with Barclays Capital, said in an interview. He has an “overweight” rating on the shares.

The average estimate of 11 analysts surveyed by Bloomberg was for a loss, excluding some items, of 62 cents a share. On that basis, Tesla reported a fourth-quarter loss of 47 cents a share in 2010’s fourth quarter. The company is scheduled to release quarterly results tomorrow.

Tesla seeks to become a dominant seller of premium electric vehicles, aided by the agreements with Daimler and Toyota. The company last week unveiled and began taking reservations for the Model X battery-powered sport-utility vehicle that goes on sale in 2013, after Model S debuts.

Tesla gained 5.3 percent to $33.17 at the close in New York. The shares have risen 16 percent this year.

‘Self-Sustaining’ Company

Tesla, named for inventor Nikola Tesla, aims to build as many as 20,000 units of Model S next year. Tesla has said it expects Model S sales to help it become profitable for the first time by as early as next year.

“We believe Tesla is at the cusp of becoming a self- sustaining company, in terms of revenue, with a crisp execution of the Model S launch,” said Rozwadowski, who estimates the carmaker lost 62 cents per share in last year’s fourth quarter. “A lot of the company’s future success will be determined by a successful launch of Model S. Investors are focused on that.”

A widening of Tesla’s quarterly loss will affirm the views of Tesla critics, said Alan Baum, principal of Baum & Associates, a provider of automobile-industry analysis in West Bloomfield, Michigan.

“The people who think electric vehicles are not ready for prime time are going to say yet again that Tesla is a failure,” Baum said.

Loss Warning

Tesla is among the most-shorted U.S. stocks. Almost 65 percent of its shares available for trading, or float, were sold short as of Jan. 31, the second-highest total in the Russell 1000 Index, according to data compiled by Bloomberg. Short sellers profit from price declines by selling borrowed securities and replacing them with stock bought at lower levels.

Tesla has made it clear since its initial public offering in 2010 that revenue would decline in the period prior to the start of Model S deliveries, Musk said in a Feb. 9 interview.

“People shouldn’t focus too much on the current quarters of revenue,” Musk said in Hawthorne, California, prior to unveiling the Model X.

Given the timing of the start of production of electric sedans at Tesla’s Fremont, California, plant, “it’s really difficult to avoid, but there’s nothing happening that wasn’t predicted two years ago,” he said.

Orders for Model S exceed 8,000, and are increasing, Musk said, without elaborating.

“Demand for the car has been phenomenal,” he said. “We’re sold out until March next year.”

Model X

The Model X, Tesla’s first crossover that comes out next year, is derived from the underpinnings of Model S car. The mid- size SUV, touted by Tesla as faster than Porsche AG’s 911 sports car and roomier than the Q7 SUV of Volkswagen AG’s Audi brand, will be built in 2013 at the Fremont plant that starts making the Model S this year.

Deliveries are to begin late next year and expand throughout 2014, Musk said. Tesla provided no pricing details for the Model X. Both the Model S and Model X qualify for a $7,500 U.S. federal tax credit aimed at encouraging sales of electric vehicles.

Tesla also is to begin supplying battery packs and motors to Toyota for an all-electric version of its RAV4 compact SUV that will be sold this year, initially in California. Tesla also has contracts to supply its technology for use in Daimler models.

While it may not make money for a while, Tesla has gained credibility, Baum said.

“Tesla now has serious people involved, with automotive backgrounds, working to get the products to market on schedule,” Baum said.

--With assistance from Nick Baker in New York. Editors: Bill Koenig, John Lear

To contact the reporter on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net


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