Tesla's Q3: Margins Up, Losses Continue for the Electric Vehicle Pioneer

Shares of Tesla Motors (Nasdaq: TSLA  ) are up to $29.32 for a 19.2 percent gain today (!) on heavy trading volume. This comes as Tesla reported their third-quarter earnings -- including a loss of $34.9 million.

Fiscal fundamentals don't really matter in the case of Tesla's stock. The company's future is based, not on the sales of their roadster or on the company's financials today, but on the firm's execution in ramping up to mass production and convincing sales of their Model S sedan in the Nummi factory. The stock price is also subject to the reality distortion field surrounding founder, financier and movie cameo, Elon Musk. The company claims that the Model S development is on track for lauch in mid-2012.

We recently reported on the $30 million that Panasonic invested in Tesla as their battery development partner, their SUV plans, a test drive in their new roadster and a report on a tour of their Palo Alto factory.

Revenues for the third quarter of 2010 were $31.2 million, a 10 percent increase from the $28.4 million reported in the prior quarter. Gross margin improved to 30 percent, up from 22 percent for the prior quarter. Net loss for the quarter was $34.9 million as compared to $38.5 million in the prior quarter.

"We are rapidly preparing our Fremont facility for the production of the Model S. At the same time, we have initiated our alpha build process as planned, with the goal of completing the first alpha prototype by the end of the year," said the CEO in yesterday's earnings call. adding, "In October, we signed an agreement with Toyota for the development of a complete powertrain for the electric Toyota RAV4 vehicle -- including the battery pack, charger, motor, gearbox and associated software. We have also recently completed all of the milestones for the Daimler A-Class battery development, and are now in the production phase."

Business Highlights

  • Tesla completed the purchase of its automotive manufacturing facility in Fremont, California, formerly owned by New United Motors Manufacturing, Inc. (NUMMI) for $42 million. The facility will become the future home of Model S production.
  • The Model S alpha build is under way with the stamping, casting and extrusion of the body panels and the assembly of the body-in-white. 
  • The Model S prototype powertrain has begun road testing to complement its ongoing laboratory testing.
  • In October, Tesla completed the development of the battery and charger for the Daimler A-class electric vehicle and is now delivering production parts.
  • In October, Tesla formalized an agreement for the development of a validated powertrain system, including a battery, power electronics module, motor, gearbox and associated software, which will be integrated into an electric vehicle version of the Toyota RAV4. Based on preliminary specifications, Toyota will pay Tesla approximately $60 million for the development services as deliverables are completed.

The looming competitve threat for Tesla is the more than ten EV platforms being introduced over the next two years from GM, BMW, Nissan, BYD and a long list of incumbents and startups. It will be interesting to watch the Tesla stock respond to those market forces.

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