Bloomberg News

Tesla’s Musk Targets Second-Half Sales Boost With Model S

February 17, 2012

(Updates with Daimler comment in 11th paragraph.)

Feb. 16 (Bloomberg) -- Tesla Motors Inc., the maker of battery-powered cars run by entrepreneur Elon Musk, projects revenue will grow in the year’s second half as deliveries of the new Model S sedan eclipse those of the outgoing Roadster.

The company said yesterday its fourth-quarter net loss widened to $81.5 million. Revenue in 2012 may be as much as $600 million, almost triple that of last year, with 90 percent coming in the second half, Tesla said.

“The bulk of 2012 revenue is Model S-related,” Musk, 40, said in a conference call yesterday. Palo Alto, California-based Tesla plans to deliver as many as 5,000 of the cars this year.

The carmaker, named for inventor Nikola Tesla, wants to be a dominant maker of premium electric vehicles and to be profitable as early as next year. Sales of its $109,000 Roadster sports car are ending and production of the Model S, with a $57,400 base price, begins mid-year with a goal of boosting annual vehicle deliveries to more than 10 times the current pace.

Until Model S deliveries begin, Tesla’s main revenue source is supplying battery packs and other parts to Toyota Motor Corp. and Daimler AG, two of its investors.

The net loss for the three months ended Dec. 31 was 78 cents a share. That compares with a deficit of $51.4 million, or 54 cents a share, a year earlier. Excluding some items, the per- share loss was 69 cents, compared with 47 cents a year earlier, Tesla said. The average of 11 analyst estimates compiled by Bloomberg was for a loss of 62 cents.

Tesla rose 1.9 percent to $34.25 at 12:44 p.m. New York time. The stock had gained 18 percent this year through yesterday.

Daimler Deal

The company also said it’s starting a development program with Daimler for a new Mercedes-Benz vehicle with a full Tesla powertrain, including batteries, a motor and electronic controls and software. Musk didn’t elaborate on the project, saying details would come from Daimler.

“I do expect that this will be significant, probably more significant than the sum of all deals we’ve done with Daimler to date,” Musk said. Tesla has previously supplied battery packs for Daimler’s electric Smart minicars and Mercedes A-Class hatchbacks.

Tesla said Nov. 2 it had a letter of intent from Daimler for the new vehicle, and provided no details at the time.

Daimler is “checking the feasibility of the project,” said Han Tjan, a company spokesman based in New York. “It’s more likely it would be something in the compact car segment,” he said, without elaborating.

Design Expertise

“It’s probably not something that will be for a mass-scale vehicle,” said Ed Kim, an industry analyst at researcher AutoPacific Inc. in Tustin, California. While Tesla’s projects with Daimler and Toyota aren’t large in vehicle volume, “the benefit they get from even associating themselves with Daimler and Toyota is worth a ton,” he said.

Tesla will begin shipping battery packs and motors for use in an all-electric version of Toyota’s RAV4 compact sport- utility vehicle this year.

“What those projects say is they’re being viewed as a credible source of design expertise,” said Alan Baum, principal of Baum & Associates, a provider of auto-industry analysis in West Bloomfield, Michigan. “Daimler has the capability internally to do this, but is choosing to work with Tesla.”

Tesla said fourth-quarter revenue rose 8.5 percent to $39.4 million and that annual sales in 2011 increased 75 percent to $204.2 million.

“The market, at least so far, is a little skeptical,” said Jeremy Anwyl, vice chairman of Edmunds.com, an automotive pricing and data service in Santa Monica, California. “The risk for Tesla is that they get overenthusiastic and run ahead of the market for electric vehicles.”

Roadster Sales

Sales of Roadsters exceeded 2,150 through the end of 2011, and a final 330 units of the car will be sold in Asia and Europe this year, Tesla said. Chassis production for the car at Group Lotus Plc’s factory in Hethel, England, has ended.

Tesla plans to build as many as 20,000 Model S cars next year, with top-end versions selling for $97,900. The company unveiled and began taking reservations last week for the Model X battery-powered SUV, which will go on sale in late 2013.

Advance sales of the Model X exceed 500 vehicles, representing future revenue of more than $40 million, Tesla said in a statement yesterday.

“This is by far the best-selling car in Tesla history, by a significant margin,” Musk said.

Model X

The Model X, Tesla’s first crossover, is derived from the underpinnings of the Model S. 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, California, plant that starts making the Model S this year.

Model S reservations exceed 8,000, Tesla said yesterday.

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.

The company will face tougher competition in the next few years as larger automakers begin releasing lower-priced electric vehicles, Anwyl said.

“Success is not assured,” he said.

--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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