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Tesla's 1st Profit Blows Away Expectations

John Rosevear
May 8, 2013

Tesla delivered 4,900 Model S sedans in the first quarter. Photo credit: Tesla Motors

Tesla Motors (NASDAQ: TSLA) announced a first-quarter profit of $15 million, excluding some items, late on Wednesday, a result driven by strong sales of the company's award-winning Model S sedan.

Tesla's $0.12 per-share profit was well above Wall Street's consensus expectation of $0.04 a share, according to Thomson Reuters. Needless to say, it was also a huge improvement over Tesla's $0.76-per-share loss in the year-ago quarter.

Shares moved sharply higher in after-hours trading on the news.

Tesla's first-ever profit comes on stronger-than-expected sales
This was Tesla's first-ever quarterly profit in its 10 years of existence, and it comes as the Silicon Valley start-up continues to ramp up production and sales of the Model S, its second vehicle and the first to be mass-produced in Tesla's California factory.

Tesla said that it produced more than 5,000 Model S sedans during the first quarter, and that it "recognized 4,900 vehicles as revenue," meaning that they were fully paid for and delivered to customers.

That's a strong result. CEO Elon Musk said in a statement that it was made possible by Tesla's focus on improving production efficiency, something that in turn was made possible as the company's processes (and its suppliers) got up to full speed. That focus on improvement led to a 40% decline in the time required to build a Model S between December and March, Musk said.

A big jump in revenue driven in part by sales of tax credits
Tesla's revenues rose to $562 million in the first quarter, an 83% increase from the fourth quarter of 2012. Not all of that was from Model S sales: Musk said that Tesla continued to supply electric powertrains and battery packs to Toyota (NYSE: TM) for use in the Japanese giant's all-electric RAV4 SUVS.

Tesla also continues to work with Mercedes-Benz on development of a small electric car; that work generated $7 million in revenue during the quarter, Musk said.

Tesla acknowledged that it had made $68 million, or 12% of its total revenue during the quarter, via the resale of "Zero Emission Vehicle," or ZEV, tax credits issued by the state of California.

Analysts had recently speculated that the sale of ZEV credits could account for a significant portion of Tesla's earnings. Under California's arcane green-car laws, Tesla receives a credit for about half of the cars it sells. It then resells its credits to other automakers who don't yet meet California's ZEV sales requirements. Tesla s