Five Tesla takeaways from Elon Musk's call with car industry analysts

Here’s what you need to know from Elon Musk’s call with Wall Street analysts who follow his Tesla Motors electric car company.

1: Tesla is selling a lot of cars for a lot of money.

Musk told investors Tesla would sell about 35,000 cars this year, up from a little more than 22,000 last year.  By the end of this year, he expects to be selling cars at a 1,000-a-week pace.  An assembly line under construction at Tesla’s factory in Fremont, Calif., will help the automaker reach that goal.

Buyers are loading up Tesla Model S sports sedans with a ton of options and are going for the biggest battery choice to make sure they have the longest range on a single charge.  Elaine Kwei, an analyst at the Jefferies investment house, crunched the numbers and estimates buyers were paying an average $108,000 for the Model S. It has a starting price of about $70,000.

2:  Look to international markets for the biggest sales growth.

International sales were just a small slice of Tesla’s business last year, but that’s about to change.  Musk said he expects sales to eventually roughly break down to thirds.  The U.S. will account for a third of deliveries, Europe a third and China the remainder.  


“We expect Tesla’s international expansion into China and other global markets to be the dominant theme for 2014,” Kwei said.

3: Tesla is as much a battery company as a car company.

Not getting enough batteries from Panasonic, its primary supplier, was one drag on Tesla production and sales last year.  Musk said it will face some of the same battery cell supply constraints during the first year but will improve toward year-end as Panasonic increases production.

Musk told analysts Tesla will provide more information next week about its the so-called gigafactory -- a battery research and production venture that “will allow us to achieve a major reduction in the cost of our battery packs and accelerate the pace of battery innovation.”

“We expect that there will be more than one partner in the factory,” Musk said. “The default assumption is that Panasonic will continue to partner with us on the gigafactory. But there will be other partners.”

He said getting the gigafactory up and running is a critical step in Tesla’s efforts to produce its “Generation Three” vehicle, a small electric car that is expected to sell for $35,000 to $40,000.  

Musk said the Fremont factory is large enough to support the production of sales of hundreds of thousands of the smaller Tesla.

4: Get ready for the Model X.

Tesla plans to launch sales of its second model, the Model X sport-utility vehicle, based on the Model S, late this year.  Sales will probably be limited from dozens to hundreds.  This looks more like a 2015 play.  But Musk said the prospects for the new model are good.

"Model X demand is very high even though there has been zero marketing," Musk said. "It is like the fish are jumping in the boat."

5: Tesla does not behave like other automakers.

This is a company creating a new business model for the auto industry.  It doesn’t franchise dealers, choosing instead to sell its cars out of company owned stores.

By maintaining control of its sales channel, Tesla has better control over price.  Customers go to the showrooms, pick out the color, interior, battery size and options and place an order. There’s not haggling or horse-trading.  It is like going to the Apple store and ordering a computer.  

Tesla is seeing rapid sales growth in the U.S. without advertising, a move that saves countless dollars.  You won’t see a Super Bowl ad or "American Idol" sponsorship.  Tesla’s marketing all comes from its media buzz, social media and word of mouth.

The financial details

Musk talked to the analysts to detail the automakers' fourth quarter and full-year financial results, which were disclosed Wednesday afternoon.

Investors liked what they heard, including Tesla's calculation that it earned $46 million, or 33 cents a share, in the latest quarter, after making special adjustments to account for the deferred profit from automotive leases and other factors. That exceeded the Wall Street analyst consensus of 21 cents a share.

But by so-called GAAP, or traditional accounting, Tesla only narrowed its losses to $16.3 million in the fourth quarter compared with a deficit of $89.9 million in the same period a year earlier.

For the full year, the automaker lost $74 million, an improvement from its 2012 loss of $396.2 million. Revenue more than doubled to $615.2 million for the quarter. Revenue for the year rose almost five-fold to slightly more than $2 billion.

Tesla shares soared $13.69, or 7%, in midday trading Thursday to $207.33.


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