Tesla Motors Inc (NASDAQ:TSLA) not only booked a loss last quarter, it did even worse than expected.
For its second fiscal quarter of 2016, the automobile manufacturer reported a loss of $1.06 per share of TSLA stock and sales of $1.56 billion.
Analysts were expecting the company to report a per-share loss of 52 cents on revenue of $1.62 billion. Year-ago sales from Q2 rolled in at $1.2 billion, and the electric carmaker reported a loss of 54 cents per share of TSLA stock.
Tesla had already reported it delivered a total of 14,370 vehicles in the second quarter, up from 11,532 vehicles in the same quarter a year earlier, but down from Q12016’s 14,820. Still, the company actually produced 18,345 automobiles during the quarter, setting a new quarterly record and ramping up output to the tune of some 2,000 vehicles a week.
The news had surprisingly little impact on TSLA stock, however; perhaps indicating the market had already priced in a likely letdown.
Tesla’s Model 3
Late last month, Musk unveiled what’s being referred to as the “Master Plan Part Deux,” and the Q2 letter to shareholders largely picked up where that message left off.
The first part of his personal/professional master plan was the normalization of electric vehicles. That’s now happened. Going forward, Musk aims to diversify the kinds of electric vehicles Tesla makes, even beyond the Model 3. Large semi trucks and pickup trucks are now on the radar, as is a deeper dive into residential solar power and at-home battery-based storage.
Little was said to owners of TSLA stock about the next phase of the master plan in Musk’s letter, however. Rather, Musk offered some more color on the upcoming Model 3, saying:
“We have completed the design phase of Model 3 and released Model 3 for tooling, planning and validation… Some Model 3 production equipment is already on line, including initial capacity in our stamping and paint centers. Later this year, we plan to begin construction of new Model 3 body and general assembly centers.”
The Model 3 was unveiled in March, with a projected base price of $35,000. Nearly 400,000 Model 3’s have been reserved already, and it’s still on schedule for a late-2017 release.
Musk Hasn’t Put a Lid on Rising Costs
The reworking of production lines as well as the prep-work for the Model 3 has not been cheap or easy, though. Operating expenses jumped 33% from $383.5 million in the second quarter of 2015 to $512.8 million last quarter. Net losses grew from $184.2 million to $293.2 million. As far as cash, Tesla grew its balance from $1.2 billion at the end of 2015 to $3.25 billion as of the end of June, but the company made a secondary offering of TSLA stock in the meantime.
Musk also recently conceded that Tesla would need a significant reduction in capital expenditures to continue preparation for the Model 3, as well as continue the construction of the gigafactory just outside of Reno.
Although not yet complete, the company hosted a grand-opening event in late July to introduce the facility. Tesla intends to have all the lithium-ion batteries needed to meet Model 3 demand once the new, lower-end car rolls off the line in the latter part of 2017.
Tesla and SolarCity: A Family Affair
Tesla Motors also recently made an official bid for solar power name SolarCity Corp (NASDAQ:SCTY), and the idea was met with quite a few jeers. Although the follow-up offer of $2.6 billion was less than the initially floated $2.8 billion, some contend SolarCity will only be a distracting cash-drain.
Others are concerned that Tesla Motors Inc CEO Elon Musk is only motivated to bail out his cousins that presently manage the struggling solar company. Still others note that Musk is one of biggest SCTY shareholders, and stands to gain the most from the sale of SolarCity to Tesla.
Independent shareholders still need to vote on the matter, and the acquisition target has the right to shop for a better offer. No such offer is anticipated, however, with the echoes of lowered 2016 installation guidance still ringing.
Bottom Line on Tesla Earnings
During the first half of the year, the company delivered roughly 30,000 automobiles. It says it will deliver 50,000 during the second half of the year.
All told, Musk believes Tesla will be producing 500,000 electric automobiles per year by 2018. By 2020, the figure is projected to be near one million vehicles.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.