This wasn't a surprise: Tesla Motors
The Silicon Valley electric-car start-up posted a loss of $0.53 a share on revenues of $58.2 million for the quarter. Both of those numbers exceeded consensus Wall Street estimates, but the trends weren't a surprise: Demand is strong (by Tesla standards, at least) for the company's current car, the Roadster, while development of the upcoming Model S sedan is burning big bucks.
The big surprise was elsewhere -- a hint of a huge new deal with mighty Toyota
Tesla's big surprise
Tesla has parts-and-technology deals in place with Mercedes maker Daimler and battery supplier Panasonic
That RAV4 contract delivered $19 million to Tesla's bottom line during the quarter, and it's expected to bring about $100 million after the deal was expanded in July. But on Wednesday, Musk hinted that much more may be on the way: During a call for analysts, Musk said the company was discussing a deal with Toyota that would be "an order of magnitude" larger than the July contract.
That means billion-with-a-B, the company confirmed after the call. It's not yet a done deal, and we can only guess at the details, but that kind of contract would transform Tesla from a long-shot start-up carmaker to a serious, credible industry supplier.
Maybe even a profitable one. That would be a nice surprise for shareholders.
A smarter route to profitability?
Musk has talked brashly of "disrupting" the global auto business, but I've long thought that the company's best path to sustainable profitability would be as a supplier, not a carmaker. The barriers to entry as an auto manufacturer are immense in today's low-margin, globalized car market, but Tesla's experience with electric power trains makes it a valuable potential partner for big automakers looking to up their electric game.
Technologically, Tesla's kind of a one-trick pony, but it's a good trick. The Roadster was the first, and is so far the only, all-electric car that meets global quality expectations with a range comparable to conventional gas-powered autos. To some extent that range advantage is due to the Roadster's expensive battery pack (and corresponding six-figure price point), but the Tesla systems that manage those batteries are good enough to have attracted Toyota's attention, and Toyota is no green-car slouch.
Intriguing possibilities going forward
Tesla was never likely to make it as "just" a carmaker. Plain and simple, the company isn't likely to ever have the scale or resources to compete profitably with the likes of Ford
But now we can at least credibly imagine Tesla as the outsourced center of Toyota's electric-car expertise. Could that lead to profitable tie-ups with other automakers? Or maybe even a buyout offer? Tesla's market cap is still under $3 billion -- even an offer with a fat premium wouldn't strain any of the big automakers too badly.
These are just possibilities right now, of course. But they're worth close watching, because this company seems to have a way of getting more interesting every quarter.