2 Surprising Takeaways From Tesla's Fourth-Quarter Report

Tesla Motors (NASDAQ: TSLA  ) stock climbed to a fresh high this week after the electric-car maker reported impressive fourth-quarter results and offered better-than-expected guidance for the year ahead. Investors pushed shares of Tesla up more than 15% to $223.32 after the market close Wednesday on the news, and the stock was priced around $209 a share at close on Thursday. 

However, instead of rehashing the company's much talked about earnings results, let's take a closer look at a few of the overlooked details that emerged during Tesla's call with analysts last night.

Twitter saved Tesla's sales from going up in flames
Social media saved Tesla from shrinking demand caused by the media firestorm over recent Model S fires, according to the company's outspoken CEO, Elon Musk. Customer deposits, or reservations, as they used to be called, were up 16% in Q4. However, that almost wasn't the case. On the call with investors, Musk said Model S demand declined almost immediately following news of multiple Model S fires.

Source: Elon Musk Twitter account screen shots.

Yet, Tesla never had a fire problem, but rather a perception problem because of the media's role in hyping the fire incidents. As a result, Musk was quick to promote the safety of the Model S on his Twitter feed, Tesla's blog, and through interviews on major U.S. networks. "In the absence of social media, I'm not sure we'd have been able to correct the misperception," he said yesterday.

Source: Elon Musk Twitter account screen shots.

While the National Highway Traffic Safety Administration, or NHTSA, is still investigating the Tesla fires, the company has made significant over-the-air updates to the Model S to quell safety concerns. Moreover, Musk is confident that the NHTSA will reach a positive outcome in its investigation. 

Get ready to pay for perks
Another thing investors may have missed from yesterday's earnings report is the fact that Tesla will begin charging drivers for its data connectivity services. In its latest shareholder letter, Tesla said, "New Model S customers will now receive free data connectivity and Internet radio for four years." Presumably, customers will need to pay for the use of Tesla's Slacker Radio and Internet connectivity services thereafter. 

This may come as a surprise to existing Model S customers, since up to this point they've been able to browse the Web on the go for free through the car's 17-inch touch screen. To be fair, Tesla was transparent about these changes and even said that for existing Tesla customers, the free four-year period would be effective beginning Jan. 1, 2014. In rare cases, Tesla said it would charge customers for extreme data use.

AT&T (NYSE: T  ) currently provides the wireless network chips used in Tesla's Model S. Per its agreement with AT&T, Tesla's electric car uses Evolved High-Speed Packet Access, or HSPA+, to create a Wi-Fi hotspot so that drivers can get real-time traffic alerts or use the car's touch screen to browse the Internet. Tesla's cars also receive wireless updates over the Internet, which allows the company to remotely fix bugs in the car's software.

This arrangement is also a win for AT&T. Contracts with automakers such as Tesla give the wireless carrier a new growth channel outside of mobile devices. As a result, it's likely AT&T will ink more deals in the connected car space in the year ahead. While specific details of Tesla's agreement with AT&T weren't disclosed, it's likely Tesla would take a percentage of the proceeds from future data plans purchased by Tesla drivers.

Ultimately, the most exciting takeaway for investors is the fact that Tesla's overall growth plans are on track. Tesla is set to launch its crossover SUV the Model X later this year, and Musk thinks Model X demand will actually exceed demand for its Model S. If that's the case, investors can expect another record year from the upstart automaker.

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Read/Post Comments (14) | Recommend This Article (3)

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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 February 21, 2014, at 8:12 AM, drax7 wrote:

    Thanks Tamara .

  • Report this Comment On February 21, 2014, at 8:36 AM, SteveTG3 wrote:

    Tamara, you have a solid track record of writing well researched articles on Tesla, though here on free data connectivity and internet radio you've gotten it backwards... this was a big piece of GOOD NEWS for Model S owners!

    No need to take my word for it, on Tesla Motors Club there is a new thread, titled "Free data for four years!" with comments such as,

    "Bravo Tesla!... classy move makes current owners happy."

    "WOW!! Outstanding!"

    "This just made my day!"

    "...incredible! It just gets better and better!"

    (from day 1 owners were told that until details were ironed out with their data partner (now known to be ATT), they would have free data connectivity. thus, since late 2012, it's sort of been "any day, we're gonna lose this lucky little perk." I think, but am not certain that the free internet radio was understood also to be a perk that was expected to be equally short-lived." Bottom line, customers are thrilled with this news).

  • Report this Comment On February 21, 2014, at 8:58 AM, Ustauber wrote:


  • Report this Comment On February 21, 2014, at 9:43 AM, countrarian wrote:

    "Yet, Tesla never had a fire problem"

    Really, so there are new model vehicles out there which haven't been recalled who have the same number of fire issues?

    Just because the CEO of a company tweets something about their own company it doesn't make it true.

  • Report this Comment On February 21, 2014, at 10:22 AM, SteveTG3 wrote:

    countrarian, I think Tamara is accurately pointing out that having vehicle fires markedly less frequently than industry average is an advantage not a challenge for a manufacturer.

  • Report this Comment On February 21, 2014, at 10:35 AM, countrarian wrote:


    The problem is that compared to new ICE it does not have vehicle "markedly less" frequent fire issues. Compared to newly introduced vehicles (which is a much fairer comparison than all the ICE vehicles on the road) it has more.

  • Report this Comment On February 21, 2014, at 10:46 AM, SteveTG3 wrote:


    please provide a link with data showing that the model S has a higher rate of fires than other new vehicles.

    in the mean time, there is one piece of data, the one that matters most, that no other vehicle can match,

    *****there has NEVER been a death or serious injury for a passenger in a Model S.*****

  • Report this Comment On February 21, 2014, at 11:05 AM, ffbj wrote:

    Spectacular videos of conflagrations of video's, the old adage: a picture, in this case moving pictures, is worth a thousand words, comes to mind. So perhaps in the Pinto days hundreds of lives could have been saved if people with camera phones existed.

    Contrast the way Tesla has acted in response to incidents of fires to the way Ford acted in the wake of reports that the Pinto was unsafe and libel to explode if impacted from the rear. The denied it all and even had meetings where they decided it would it be cheaper to pay claims, that to fix the car death traps they had created.

    In some ways Ford was representative of a corporate culture gone amuck.

    Hopefully Tesla is representative of a new sort of corporate attitude. One that will make the best products it can and respond to the concerns of it's customers, rather than try to make the most money possible, with shoddy products, that are actually dangerous, and lawyering up to protect your bottom line. Making money, possibly by any means necessary to do so, is not the way to do business, though many still think it is.

  • Report this Comment On February 21, 2014, at 11:24 AM, SteveTG3 wrote:

    we live in a world where all vehicles have fire risk. if the threshold is of too dangerous is a photo or video of a vehicle fire, we will need to ban automobiles.

    the relevant point is relative fire risk. data on whether a given vehicle has a higher frequency of vehicle fires than what is deemed acceptable. the only data I know regarding the Model S indicates it is substantially less likely to have a fire than the vehicles the public at large has accepted for over 100 years.

    and, fwiw, while there have been videos of 3 fires with a model S, none of them are even in the same zip code of "spectacular conflagration". what was a spectacle was the media seeing two things they think will make them $, video, and a storyline they can write contrary to prevailing expectations (dog bites man ---> miracle car is not flawless). the Tesla fires on video looked like $ to "news" producers and editors, but make no mistake, for a Hollywood action movie, they'd never make the cut.

  • Report this Comment On February 21, 2014, at 12:49 PM, Pixma25 wrote:

    In the US we average a death for every 70 million miles driven. So far, Teslas have gone 200+million without one. It might be they've just been fortunate so far, but a year from now they will have gone almost 700 million. If there still hasn't been a fatality in a Tesla by then, I'd say it's a very significant statistic.

  • Report this Comment On February 21, 2014, at 1:05 PM, Jim5437532 wrote:

    It seems so far none of the Chevy Volts, Nissan Leafs, or Toyotas Rav4EV sold to customers have had their batteries catch fire after running over road debris or being in accidents. 2 Tesla S have caught fire after hitting road debris and 1 Tesla S caught fire and exploded after an accident.

    Statistically the Tesla's drive batteries are more likely to catch fire and explode after running over road debris or having accidents than other EVs.

    In regards to safety the Tesla is very similar to the "they decided it would it be cheaper to pay claims, that to fix the car death traps they had created." Ford Pinto.Millions of Ford Pintos were made. How many Ford Pintos had their gas tanks catch on fire or explode from accidents or only running over road debris, after only 30,000 of them were made? Tesla has only manufactured about 30,000 model Ss yet it's already had three that have had battery fires after running over road debris or being in an accident. So the Tesla is probably worse than the Ford Pinto.

    Tesla has been known for about a year, possibly longer to have faulty charge connectors, yet Tesla chose not to fix the problem. It wasn't until people reported the problems to the media and the government, that a recall was issued. Even though Elon Musk promised that the new adapters would be mailed out in two weeks, over a month later customers have not received the replacement adapters under the recall and they have not received mailings warning of the safety hazards.

    Over a year ago Tesla allegedly applied for a patent for improved battery protection. Seemingly Tesla chose not to provide the improved battery protection in the model S. It seems that Tesla decided that they would rather pay out claims than fix the death traps they have created.

    Tesla and Tesla fan boys care more about stock prices than safety. Greed.

    Tesla is an example of the corporate culture gone amok. If you want to settle for a Tesla, that's your own business. My standards are higher.

    Tesla model S, the E-Pinto.

  • Report this Comment On February 21, 2014, at 1:28 PM, SteveTG3 wrote:

    Pixma, thanks for adding that detail on the miles driven per vehicle death. indeed, as you've suggested it is encouraging but early and a year from now the sample size will be a quite a lot bigger.

    the absence of any serious injuries for those in Teslas would already be more statistically significant, even if we don't have the exact data (as serious injuries in vehicle accidents are more common than deaths in vehicle accidents).

  • Report this Comment On February 23, 2014, at 11:38 AM, OliverInvestLLC wrote:


    The Tesla earnings report was a "Sham." In one paragraph, the CEO said, " reported late Wednesday a fourth-quarter net loss of $16.3 million, or 12 cents a share, narrowing a year-ago loss of $89.9 million, or 79 cents a share." In another paragraph the lying CEO said, "we sold 6,587 cars, but in Detroit at the auto show, the CEO said he sold 6900 cars." In yet another paragraph, the lying Tesla CEO said, "We will sell 7400 cars from 6,587 cars produced in the fourth quarter of 2013. However, vehicle deliveries are expected to reduce to 6,400 from 6,892 cars in the fourth quarter due to increase in the number of vehicles in transit to Europe and Asia." Ok, so the CEO just told everyone that "Demand in the USA is DEAD." This is what you call, I, the CEO, just gave Wall Street a very Crafty Earnings Report which hid the SINKING DEMAND IN THE USA and all the "Expenses from the recall and build out of the charging stations." The Tesla stock is so "Fraudulently Manipulated by Investment Boards and Fraudulent Brokers and Brokerage Firms," it is amazing the company is not being raided by the FBI and SEC for cooking the books. Many investors cannot believe the SEC is not looking into the false earnings report along with the non-disclosures in the earnings report that should have been reported. I made hundreds of thousands of dollars trading this SCAM of a company, now I am out. I will sit back and watch as the company catches fire for lying to Investors!

  • Report this Comment On February 23, 2014, at 7:19 PM, OliverInvestLLC wrote:

    Yet another lie by the Tesla CEO in the earnings release. How did Tesla generate over $800 million in cash from a little over $200 million in one year? "Tesla had cash and cash equivalents of $845.9 million as of Dec 31, 2013, compared with $201.9 million as of Dec 31, 2012. Long-term debt was $586.3 million as of Dec 31, 2013, versus $452.3 million as of Dec 31, 2012." The "Cooking of the Tesla books" just continue to intrigue me. Where is the SEC and FBI and why hasn't Tesla and the CEO been shut down and the CEO arrested for fraud..!

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Tamara Rutter

I've been an analytical writer for The Motley Fool since 2011. I cover the sectors of Consumer Goods, Technology, and Industrials. Connect with me on Twitter using the handle, @TamaraRutter -- I'd love to hear from you!

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