The maker of electric cars, Tesla Motors (TSLA, Financial), is one of the very few companies that have grown 10 times since its debut in July 2010. Its shares have risen 940% since then. The company’s luxury electric cars have become very popular in the market, and the car maker has been successful in developing a good taste for it.
But improved results each time have made people expect too much from the company, which it was unable to match up to in its fourth-quarter results. Tesla Motors’ fourth quarter numbers fell short of the Street’s estimates, sending its share price down. Let’s take a look.
What made the numbers fall short?
Revenue for the quarter surged 56% to $1.1 billion as compared to the previous year. This was below the analysts’ estimate of $1.23 billion. However, revenue for the year stood at $3.6 billion, much higher than last year’s $2.48 billion. The sole reason for lower-than-expected top line was lower than estimated vehicle deliveries.
Tesla sold 9,834 Model S electric cars in the fourth quarter, up 43% over last year. However, the analysts were estimating it to be 11,180 deliveries. Deliveries were low mainly due to severe winter weather and shipping-related problems.
Thus, a total of 31,655 units were sold in 2014, up from 22,477 units in 2013. The company was expecting to deliver 33,000 vehicles, but delivery of 1,400 vehicles slipped from December to January. The target was indeed a difficult one, and it meant a jump of 63% over last year’s deliveries. Nonetheless, the car maker registered a great increase in this delivery metric.
Moreover, the car retailer met the production goal of 35,000 units in 2014, which is commendable. Also, most of the cars sold were in North America. 55% of total sales were in North America, 30% in Europe and 15% in Asia.
The premium electric car manufacturer registered a loss of $0.13 per share for the fourth quarter. This was quite below the analysts’ earnings estimate of $0.02 per share.
Weak China
The company witnessed lower sales in China as it sold only 120 units of the Model S in the fourth quarter. However, it plans to improve the service quality in the region by simplifying the buying process and having its personnel install charging points at customers’ homes before the vehicle is delivered. It also remains focused on its efforts in the existing regions before it expands into new markets.
The road ahead
Apart from growing its geographic footprint, Tesla Motors has a number of efforts lined up for its growth. It is making efforts to increase its charging points in all the major markets. Most importantly, it has a few new launches on its cards, which should help the retailer attract more customers.
Tesla Motors will be launching the new Model X SUV in the second half of 2015. This new model is being awaited by the customers and has 20,000 reservation orders already.
Another new car is Model 3 which will be introduced in 2017. The company aims to increase its production for Model 3 since it caters to the mass market and comes at an affordable starting price of $35,000. Thus, it expects huge demand for the model.
Production will be increased through its $5 billion Gigafactory, which will manufacture lithium ion batteries on a large scale and save 30% in costs. Therefore, Tesla expects to deliver 55,000 units of Model S and Model X in 2015 and 500,000 cars per year by 2020.
The bottom line
Thus, it is quite clear that Tesla is aiming big and should be able to meet its targets, given the new products and the large Gigafactory set up for large scale production. Not meeting the delivery estimates is nothing to worry about and the company should compensate for it this quarter. Given the current results and efforts for the future, this car maker is expected to grow further in the future. Investors should hold on to it.
