Could Tesla Crush Its Own Guidance?

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Fremont factory. Source: Tesla Motors. 

A new report of impressive Model S sales in Norway in the month of September may be the first indication that Tesla Motors' (NASDAQ: TSLA  ) could potentially post better than expected sales in its third quarter. If the company is blowing away its sales expectations for the region, could it be beating its guidance for total vehicle sales, too?

Will the surprise factor jump this quarter?
There's good reason to be surprised to hear that Tesla is reporting better than expected sales in any region. Over the last three quarters Tesla has proven to provide very accurate guidance.

Quarter

Guidance

Actual

Surprise Factor

Q1 2013

4500 vehicles

4900 vehicles

8.8%

Q2 2013

5,000 vehicles

5150 vehicles

3%

Q3 2013

Slightly over 5,000

?

?

Based on first- and second-quarter guidance versus actual results, Tesla seems to avoid lowballing its vehicle sales estimates. Based on historical results, therefore, its realistic to expect Tesla's actual third-quarter sales to be close to its projection for slightly over 5,000 vehicles. Even more, there's little sign that Tesla's production rate will improve in the fourth quarter, either; its forecast for total 2013 vehicle sales has only been boosted by 1,000 vehicles over the past three quarters, from 20,000 to 21,000.

But if Tesla doesn't lowball estimates and management provides fairly accurate sales estimates, what can we make of this news from Norway?

Model S sales soar in Norway
Tesla's model S outsold every model in the country last month, according to The Wall Street Journal. The Model S accounted for 5.1% of the country's total sales.

It's not surprising that the Model S is doing well in Norway. The country's affluent population and its generous incentives for electric-vehicle buyers lay the foundation for a Tesla-friendly market. Even more, Tesla has recently aggressively expanded its Superchargers in the country. Demand in Norway, therefore, is expected.

But what's surprising about the report is just how well Tesla is doing in Norway. In the company's second-quarter letter to shareholders Tesla said that it expects "to deliver almost 800 vehicles this year based on current orders." But according to this Norwegian car sales data Tesla sold 616 Model S sedans in September alone. While demand in the country is obviously exceeding Tesla's expectations, what's really interesting is that Tesla has been able to actually deliver this many cars. It's especially surprising given the company's conservative guidance for basically the same vehicle sales in Q3 as Q2.

The bigger picture
Investing on quarter-by-quarter speculation isn't a smart way to invest. But there could be a deeper story at work here. During the second-quarter earnings call, CEO Elon Musk elaborated on the company's production limitations saying that it expects it to take about six months to work out its bottlenecks that are limiting production. But with Tesla blowing away its own estimates for Norway sales, could the company have worked out some of these key bottlenecks earlier than expected?

For a production-limited company, finding ways to solve bottlenecks is a key priority. Though Norway's sales do suggest some problems may have already been solved, it will be best to wait until we hear an update on the company's weekly production capacity before we officially conclude that Tesla is solving its bottlenecks.

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Read/Post Comments (8) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 02, 2013, at 7:15 PM, spawn44 wrote:

    If they can't keep up with the demand in the U.S why are they shipping cars to Norway.

  • Report this Comment On October 02, 2013, at 7:54 PM, coll1951 wrote:

    Oh Yes, when you've got the Norway market, your on top of the auto world. Every major auto manufacturer is fighting to enter this booming market, which is larger than the U.S. states of New Hampshire and Vermont combined. So goes Norway, so goes the world.

  • Report this Comment On October 02, 2013, at 9:08 PM, jamesdan567 wrote:

    The commenters seem to know more than Tesla. Maybe they should apply for jobs there and see if they get accepted. My estimate is that Elon Musk knows better what to do than these bozos.

  • Report this Comment On October 02, 2013, at 9:11 PM, btc909 wrote:

    Question is; how much does a Tesla sell for in Norway?

    Having a pre-established Supercharger Network also helps.

  • Report this Comment On October 02, 2013, at 10:04 PM, nakclhco wrote:

    I'm betting the stock goes up at least 7% tomorrow. Fell because of Baird downgrade and an internet video of minor fire caused by a front end collision with a stationary object.

  • Report this Comment On October 03, 2013, at 2:29 PM, ffbj wrote:

    I think the particular why too's and wherefores of the fire will have more impact if it turns out the battery pack, as some reports have it, caught on fire.

    So my speculative take is the guy was exceeding the speed limit, hit metal debris in the road, which punctured the undercarriage battery pack(s) near the front of the car. The metal object which was now partially impeded in the battery pack sheathing produced sparking as the metal piece dragged along the highway surface. Sparks leapt into the internal part of the battery pack, while the ruptured coolant system ignited the punctured battery cell(s) and they caught on fire. Resulting from a combination of causes.

    1. Driving in excess of posted speed limit.

    2. Hitting a metal object.

    (a)dragging said metal object resulting in sparking. (speculation).

    3. The automatic lowering of the car at highway speeds.

    4. Combustible nature of lithium when battery punctured and water applied, the damaged coolant system. (speculation)

    Continued pull back for perhaps weeks as claims, counter-claims, level of failure, investigation of root causes...etc...And no more cars catching on fire.

    So perhaps we are still looking at all the way back down $125 or so. Way out on a limb there but there are a lot of people who hate this stock.

    They may have to think about re-engineering some aspects of battery pack too. Like an individual fire suppression packet in each battery compartment, and/or extra sheathing of the battery pack. They also might want to adjust the lowering capacity of the car whereas when are going above a certain speed the car actually raises up slightly increasing drag but somewhat reducing the intensity of probability of an accident such as this, and alerting the driver that they are going too fast.

  • Report this Comment On October 04, 2013, at 10:22 AM, ffbj wrote:

    I guess there is a gel packet already in each battery pack, that turns solid when high temperatures are reached.

    It's just that cars are so darn flammable that once they start burning there are plenty of things to fuel them. Paint, tire, wire insulation, anything plastic all made with oil.

    My company van caught on fire. Smoke was seeping up through the dash so I called base:

    Me: There is black smoke coming up through the dashboard vents.

    Base: Call us if it gets worse.

    I pulled over checked the engine nothing seemed to be burning. Turned off the van.

    15 minutes later the smoking event got worse and I pulled off the highway. I parked and jumped out and saw flames coming from the wiring down the gas/ brake pedals. I got the fire extinguisher and put it out, cutting and burning my hand a bit in the process.

    I called base:

    Me: I got worse.

    Base: What do you mean.

    Me: The van caught on fire...but I put it out.

    Base: Oh.

    Well it turns out that the wires were overheating because they had jerry-rigged them so that the headlights would stay on all the time..for safety reasons. Well apparently they used the wrong gage of wire and it overheated melted the insulation,that was the smoke, and eventually they (the wires) caught on fire. The next day the van was back in service as they simply pulled all the burned wires out.

  • Report this Comment On October 04, 2013, at 4:20 PM, ffbj wrote:

    The official statement:

    Model S Fire

    By Elon Musk, Chairman, Product Architect & CEO

    Earlier this week, a Model S traveling at highway speed struck a large metal object, causing significant damage to the vehicle. A curved section that fell off a semi-trailer was recovered from the roadway near where the accident occurred and, according to the road crew that was on the scene, appears to be the culprit. The geometry of the object caused a powerful lever action as it went under the car, punching upward and impaling the Model S with a peak force on the order of 25 tons. Only a force of this magnitude would be strong enough to punch a 3 inch diameter hole through the quarter inch armor plate protecting the base of the vehicle.

    The Model S owner was nonetheless able to exit the highway as instructed by the onboard alert system, bring the car to a stop and depart the vehicle without injury. A fire caused by the impact began in the front battery module – the battery pack has a total of 16 modules – but was contained to the front section of the car by internal firewalls within the pack. Vents built into the battery pack directed the flames down towards the road and away from the vehicle.

    When the fire department arrived, they observed standard procedure, which was to gain access to the source of the fire by puncturing holes in the top of the battery’s protective metal plate and applying water. For the Model S lithium-ion battery, it was correct to apply water (vs. dry chemical extinguisher), but not to puncture the metal firewall, as the newly created holes allowed the flames to then vent upwards into the front trunk section of the Model S. Nonetheless, a combination of water followed by dry chemical extinguisher quickly brought the fire to an end.

    It is important to note that the fire in the battery was contained to a small section near the front by the internal firewalls built into the pack structure. At no point did fire enter the passenger compartment.

    Had a conventional gasoline car encountered the same object on the highway, the result could have been far worse. A typical gasoline car only has a thin metal sheet protecting the underbody, leaving it vulnerable to destruction of the fuel supply lines or fuel tank, which causes a pool of gasoline to form and often burn the entire car to the ground. In contrast, the combustion energy of our battery pack is only about 10% of the energy contained in a gasoline tank and is divided into 16 modules with firewalls in between. As a consequence, the effective combustion potential is only about 1% that of the fuel in a comparable gasoline sedan.

    The nationwide driving statistics make this very clear: there are 150,000 car fires per year according to the National Fire Protection Association, and Americans drive about 3 trillion miles per year according to the Department of Transportation. That equates to 1 vehicle fire for every 20 million miles driven, compared to 1 fire in over 100 million miles for Tesla. This means you are 5 times more likely to experience a fire in a conventional gasoline car than a Tesla!

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