Today Tesla Motors released their financial results for Q4 2015, and it’s a mixed bag. The company strongly emphasized strong sales growth for the Tesla Model S, claiming it is outselling the other cars in its class, and that “Cash Flow From Operations” went from hugely negative to hugely positive. That last is a positive sign of the health of Tesla Motors, since the financial results also showed a huge loss for the quarter, after a string of quarters of huge losses, and many Pundits claiming that Tesla Motors is losing money on every car and that it’s just a matter of time before the company collapses like a house of cards.
As is usual, Tesla Motors held a conference call for stock analysts, and I was able to listen in. What follows is a mix of a few observations from both the shareholder letter, and that conference call.
First is a personnel issue. This was the first conference call with the new CFO, Jason Wheeler, present and holding the CFO reigns. It was interesting how the CFO was much more vocal during this call than the previous CFO. In previous conference calls, Elon Musk would dominate the conversation with the CFO popping in just for a few answers. This one was answering questions right and left, and doing his best to present the idea that Tesla Motors is instituting financial rigor throughout the company. I’m taking this as a positive sign that the financial stat’s will tighten up, etc.
What I want to focus on in this post is the financial status at the current moment.
They’re claiming to have “generated $179 million of positive cash flow from our core operations defined as cash flow consumed in operations of $30 million plus cash of $209 million received from vehicle sales to our leasing partners”. In the Q1 2015, cash flow loss $54 million, Q2 2015 cash flow loss $41 million, and Q3 2015 cash flow loss $40 million. Okay, that’s fine, but according to the balance sheet they ran $320 million loss for Q4 2015, after several quarters of significant losses. Quarter-on-Quarter revenues gained significantly, to $1.2 billion in Q4 2015 from $956 million in Q4 2014, and Year-on-Year revenues from $3.1 billion in 2014 to $4 billion in 2015.
Mixed bag. On the one hand great growth in sales, on the other hand a huge loss. The flip side of the revenue growth was the company ran much bigger operating losses over 2015 than in 2014. Also, cash on hand shrank from $1.9 billion in Q4 2014 to about $1.2 billion in Q4 2015. That’s balanced by property/equipment growing from $1.8 billion in Q4 2014 to $3.4 billion in Q4 2015.
Tesla Motors has been spending money – clearly – on building factory capacity in Fremont and Reno and elsewhere, in order to ramp up the Tesla Model X production, increase Model S production, and to prepare for Tesla Model 3 production. That increase in property/equipment has to be representing new machines on the factory floor in Fremont, the build-up of the factory facilities in the Stockton area, and building the Gigafactory in Reno.
Tesla Motors has been in this position before, and I’ve written this same sort of article before. Back in 2011 and 2012, the company spent a lot of money buying and installing factory equipment to manufacture the Tesla Model S, they ran large losses, and there were plenty of naysayers. Once the production process got debugged, and production went into full swing, the financial situation completely turned around, and they even had a profit one quarter.
That’s essentially what’s happening right now. Tesla Motors has been investing, and now the factory is bigger/better and they’re ramping up the Tesla Model X production. Once that gets into full swing, which might be happening this quarter, the sales and revenue and expenses position should look much better.
By way of an example, Elon Musk said in an aside that the new “Paint Shop” has a capacity of 10,000 cars per week. The company had been using the paint shop inherited from NUMMI, then last year invested money to build a new paint shop. At a 10,000 car per week capacity, that’s 500,000 cars per year total capacity. In other words, this paint shop was put in place to prepare for manufacturing the Tesla Model 3.
Elsewhere Elon Musk reiterated that the NUMMI plant had, under GM/Toyota ownership, produced nearly 500,000 cars per year. Based on that, Tesla Motors is confident of returning that factory to that capacity. However, given the company’s goal is to produce several million cars a year by 2025, they’ll need several more car factories and Gigafactories.
In the short term, Tesla management promised that in 2016 they’ll steadily improve financial results, and may even show a profit in Q4 2016.
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