Last week on May 8th, Tesla published its 1st Quarter results, announcing a profitable quarter for the first time ever in the company’s ten year history. In a very easy to read letter to shareholders, the company announced a profit of $11.2 million, along with record sales of $562 million – up 83 percent over the prior quarter.
- 4,900 cars delivered
- Sales of $562 million up 83% on the quarter
- Gross margin at 17% – double last quarter
- Cash balance increased by $10 million to $231 million
- Manufacturing time per car reduced by 40% per unit
- Demand increasing in the US and Rest of World
The better-than-anticipated performance was on sales of 4,900 vehicles in Q1 which exceeded expectations by four hundred units, while the company’s outlook for 2013 predicts sales of 21,000 vehicles globally – an increase of thousand units over previous projections.
In a time when electric vehicle startup companies such as Fisker and Coda are either bankrupt or heading that way, Telsa’s performance is a shining light for the entire EV industry. But it should be noted however, that overall financial performance was enhanced by a couple of extraordinary factors in Tesla’s favour which together combined to tip the quarter into profitability.
The first factor was a one-time non-cash gain of $10.7 million from the elimination of a Department of Energy “warrant liability” – without which, Tesla’s GAAP profit of $11.2 million would instead have been reduced to a net income of just $556,000. Still, Tesla points out, the company was nonetheless profitable without this gain, which is good, since it won’t recur.
But, an even bigger financial boost came from the second extraordinary, and ongoing factor – the sale of zero emissions vehicle (ZEV) credits, which amounted to $68 million for the quarter. Prior to the Q1 results, The Los Angeles Times reported that ZEV credits could be worth $250 million for Tesla for the whole year, so the confirmed Q1 figure of $68 million suggests that number could be about right when pro-rated over the year.
Since this constitutes 12 percent of the total Q1 revenue, and doesn’t come from selling vehicles, it’s interesting to consider how long Tesla can expect to benefit from this important revenue stream. Here’s how it works.
Several years ago, the California Air Resources Board (CARB) introduced regulations aimed at improving air quality that mandated a zero emissions vehicle requirement on large auto manufacturers doing business in the state. The regulations are pretty complex, but in the simplest terms, they require a certain percentage of vehicles sold by each car company in California to be zero emissions vehicles. Auto companies must either comply by selling their own ZEVs to account for the required percentage of sales, or pay a fine of $5,000 per ZEV “not-sold.”
A third available option for auto manufacturers is to buy ZEV credits from companies such as Tesla. Since Tesla builds ZEVs exclusively, they accumulate ZEV credits which are essentially a surplus to their own requirements, allowing them to sell them to non-compliant car companies instead. Depending on a vehicle’s zero-emissions-only range, multiple credits may be generated per each single vehicle sale, so for example, a zero-emissions vehicle with a range of 200 miles yields five ZEV credits.
The value of each credit sold isn’t transparent, but if the penalty otherwise paid to the state is $5,000 per non-ZEV-compliant vehicle, the ZEV credit value will be somewhere south of this figure. Still, whatever the specifics, since Tesla made $68 million from ZEV credits on sales of 4,900 vehicles, that equates to close to $14,000 per car.
Without doubt it is a pretty attractive windfall for Tesla, but then again, it was designed to be. The lucrative incentive was created by California to help EV companies get off the ground – while striving to achieve air quality improvements. But how do ZEV credits sales factor into the company’s future health? And can Tesla survive without them? After all, as other car makers produce EVs of their own, over time, the value of the credits will drop.
Tesla appears not to be banking on this fortuitous arrangement for the long-term. Additionally, as the company expands its out-of-state sales, the benefit will fall over a diminishing proportion of vehicles sold. The May 8th letter to shareholders indicates Tesla is bullish on their ability to do business without relying on ZEV credits. They advise that whereas their gross margin was 17 percent in Q1, this is projected to rise to 25 percent in Q4, assuming NO ZEV credit revenue. Of course, they will no doubt continue to realize revenue from sales of ZEV credits, but it’s smart of the company not to count on it to prop up business forever.
Still, without these extraordinary factors combined, Tesla would not have returned a profitable quarter, so there will be plenty of analysts who’ll say that without the $10.7 million DoE gain, and the ability to sell ZEV credits, Tesla’s underlying business is less convincing. But, other indicators do show improved health at Tesla. Vehicle sales have beaten expectations (unprecedented in the electric vehicle world); while vehicle build time has been reduced by 40 percent and improvements in inventory and logistics management has contributed $30 million in cash in the first quarter.
In any event, the company is off to a strong start in 2013, with management focused on expansion, and let’s not forget the strength of the product itself which has barely missed a beat since its introduction. Last week, Consumer Reports gave the Model S its top rating – establishing the car as not just a good EV, but an outstanding automobile of any stripe. No doubt, Tesla is not out of the woods yet, but in a notoriously difficult industry to break into, they are proving to be the best case for the electric vehicle yet.
Nissan UK has started production of the new face lifted Leaf EV in its Sunderland factory. It follows a four-year investment in the factory and a new battery plant costing £420m.
The decision to produce the Nissan Leaf in Britain has created 2,000 new jobs, 500 of them directly with Nissan. This raises the total staff number to 6,100 at Sunderland. It has been backed by the UK Government with Prime Minister David Cameron commenting that the arrival of the LEAF in the UK shows that the car industry here is competing with the world.
“The Government has committed £400 million to make the UK a leading market for ultra-low carbon vehicles . Nissan’s announcement shows the confidence the company has in the skills-base and the business environment in the UK and that the UK is open for business.”
Nissan’s executive vice president, Andy Palmer said “The Leaf is our most technically advanced car yet and the launch of this new model, built along with its batteries in Sunderland, is a huge boost not only for the plant but for British manufacturing”.
Visiting the new production facility, Prime Minister David Cameron said: “Nissan’s record breaking year last year is a success story for UK volume car manufacturing and demonstrates how our automotive industry is thriving in the global race”.
Nissan’s second-generation Leaf incorporates hundreds of small improvements over the original Leaf. The car’s range is increased to 124 miles from 109, and the battery can be recharged in half the time. A series of suspension changes aim to improve the Leaf’s composure on European roads whilst the introduction of an entry-level Visia trim will bring the price close to £20,000 with a Government grant.
There are now 55,000 Leafs on the world’s roads, being produced at three factories; Sunderland, Smyrna in America and Oppama, Japan.
It is just the start for Nissan too: it will soon introduce an all-electric version of the NV200, known as the e-NV200; as well as an Infiniti electric vehicle which is expected by 2015. Nissan also shares EV technology with Renault, it sister company which has a growing range of EV cars.
In the last 12 months, the number of Nissan dealers selling the LEAF have increased from just 200 to 1,400: while charging points for electric cars have grown from 12,000 to more than 20,000.
It is just the start for Nissan too: it will soon introduce an all-electric version of the NV200, known as the e-NV200; as well as an Infiniti electric vehicle which is expected by 2015.
Geneva Motor Show News
Audi has revealed the A3 e-tron, a plug-in hybrid concept. Production is now expected in 2014.
Despite its concept label, Audi has already expressed an interest in having an e-tron badged model in every segment and has said that the A3 e-tron provides “a realistic glimpse in to the future of mobility as Audi is planning it”.
Power comes from a combination of 1.4-litre TFSI engine and electric motor. Together, the two power sources produce 201bhp and 350Nm of torque. Those figures are good enough to make the A3 e-tron the most powerful model in the line-up.
All drive is delivered through a six-speed e-S tronic gearbox to the front wheels, allowing for a 0-62mph time of 7.6 seconds and a top speed of 138mph. The extra weight of the battery pack and electric motor means that despite being the most powerful A3 in the current range, it’s actually half-a-second slower from 0-62mph than the 1.8 TFSI car.
This car is not about power but more about efficiency. Audi claims that the A3 e-tron is capable of 188.3mpg and emits just 35g/km of CO2, which is far better than the next most efficient and still exceptional model – the 74.3mpg 1.6 TDI.
Drivers can select between three different driving modes: the engine alone, the electric motor alone or a combination of the two. In electric-only mode, the e-tron can be driven at speeds of up to 81mph and has a maximum range of 31 miles.
A 31-mile all-electric range, electric assistance and a de-coupled ‘gliding’ mode all facilitate combined economy of over 150 mpg–albeit on the more optimistic European fuel cycle. An EPA figure in the low hundreds is more likely.
In the US Audi hasn’t yet confirmed an exact date for e-Tron sales, but early 2014 is expected. The model will go on sale alongside the A3 Sedan, also unveiled at the New York motor show.
Coming in 2013 the BMW electric i3 car.
The BMW i3, previously Mega City Vehicle (MCV), is an urban electric car under development by BMW group. The i3 is part of BMW’s “Project i” and is being planned as a new brand, BMW i. The BMW i3 is announced and expected to go into mass production in 2013 with deliveries in several world markets by that year-end. Details are still under wraps from BMW. The i3 concept car was unveiled at the 2011 Frankfurt Motor Show and BMW announced the electric car will have a “REx” range extender option, or in other words an engine[ just as the Volt has. BMW showcased a BMW i3 prototype during the 2012 Summer Olympics in London and has a London store on Park Lane. BMW is also promoting the i class vehicles with a global tour. London is scheduled for Spring 2013.
The i3 will be BMW’s first zero emissions mass-produced vehicle due to its electric powertrain, and BMW also expects to be the first company to launch a volume production vehicle on the market featuring carbon-fiber reinforced plastic to improve the vehicle’s energy consumption. BMW plans to manufacture the i3 body-in-white from carbon-fibre at a new US$100 million plant being built-in Eastern Washington State at Moses Lake, using raw material that will be shipped from Japan. This location was selected to take advantage of the abundant hydroelectric power available as carbon-fibre production requires much energy and emits a lot of carbon dioxide. The carbon fibre will then be shipped to Landshut, Germany, where the carbon-fibre reinforced plastic parts will be fabricated, and the vehicle assembly line will be located in Leipzig.
BMW’s “Project i” is a program aimed to develop a lightweight eco-friendly urban electric car designed to address the mobility and sustainability needs for people who live in megacities. According to BMW, “Project i” has three phases. The Mini E demonstration was the first phase of this project, and it was followed by a similar field testing that began in January 2012 with the BMW ActiveE all-electric vehicle. The ActiveE is based on the BMW 1 Series Coupe and is built based on the lessons learned from the Mini E trial. The last phase of “Project i” is the development of the i3 and i8 electric cars.
The Detroit Auto Show is not one of the greats but it is in the heart land of the established US auto industry. Tesla took the opportunity to show the old guard the future and displayed a concept interior for the Model X. Tesla themselves called this an ‘interior exploration’, but it gives us some ideas of what to expect in the production Model X scheduled for later this year.
The work has been done by Tesla Design Studio, and uses a mix of white and black leathers to bring contrast to the three rows of seats–the back rows, of course, accessed via the unusual Gull Wing rear doors for access to the second and third row of seats.
The black and white theme continues to the dashboard facia, dominated by the same huge iPad like touch screen display you’ll find in the Model S sedan–albeit mounted proud of the dashboard.
The exterior, also contrasting in black and white, is unchanged from the last time we saw the Model X.
Much of the Model X’s hardware is based on that in the Model S, with 60 kWh and 85 kWh battery options. Befitting its crossover body, the Model X will also offer electric all-wheel drive. Production is expected to begin in late 2013.
In its third year on the United States market, the updated 2013 Nissan Leaf will have a slightly longer range, a new and lower-priced base model, faster charging, and a more efficient cabin heater.
The 2013 Leaf is scheduled to enter production at Nissan’s assembly plant in Smyrna, Tennessee, this week.
While the 2013 Leaf is still being tested to determine its EPA range rating, Nissan says that range higher than the 2012 model’s 73 miles is “expected.”
The higher range comes not from a larger battery –the lithium-ion pack remains at 24 kilowatt-hours–but from improvements to aerodynamics, regenerative braking, and energy management. Nissan says the drag coefficient has been cut from 0.29 to 0.28.
Optional 6.6-kW charger
The much-rumored 6.6-kilowatt onboard charger will be an extra-cost option on the base model, but standard equipment on the two upper trim levels–as it is on the 2013 Ford Focus Electric. It reduces the charging time for a fully depleted battery from seven hours to about four, using a Level 2 charging station.
The onboard charger in all 2013 Leafs has also been reduced in size and relocated to a new position under the hood, which increases cargo volume by removing the “charger hump” found on the load-bay floor on earlier cars.
Nissan is offering a new and optional hybrid heater that cuts energy consumption compared to the electric resistance heater used on 2011 and 2012 Leaf models.
Three trim levels in the US
The new base trim level is called the Leaf S model. It replaces the LED headlights with less expensive projector beams, and uses 16-inch steel wheels with plastic covers rather than alloy wheels.
It also loses both the navigation system and the remote connectivity that allows drivers to turn on the climate control and monitor battery charging remotely using a smart phone.
The Leaf S offers an optional rear-view camera that displays on the smaller display screen in the center stack. The 6.6-kW charger is optional as well.
The middle trim level, the 2013 Leaf SV, rides on 16-inch alloy wheels and offers the LED headlamps and running lamps as an option.
The top-range trim level, the Leaf SL, adds a number of new standard features, including leather seats and a new design for its 17-inch alloy wheels. It features the LED headlamps as standard equipment.
AS of Jan 2013 the UK Nissan Leaf cost £25,990 on the road. This includes the £5,000 government grant.
There is talk of Leaf production moving to the Nissan plant at Sunderland. Nissan has yet to confirm this and has to announce a price for the expected lower cost 2013 UK model. Some are expecting a price of around £22 thousand.
Tesla Motors just has announced Euro pricing for the Model S for Europe that is set to go on sale over here early next year.
Speaking on the Tesla Blog, Tesla vice president George Blankenship revealed that the company is using a transparent approach to European pricing, making no more profit per car than it does in the U.S.
In the Netherlands, where Tesla is basing its European operations, a 60 kWh Model S kicks off at €72,600 . The 85 kWh models start at €83,150 and the Model S Performance starts at €97,550.
Signature models, arriving in the Spring, cost €101,400, and Signature Performance cars will be €110,950. All prices are before local incentives, and inclusive of purchase tax.
That purchase tax, plus a slight price increase to account for transport costs, import duties and other costs relevant to individual European countries (plus exchange rates) explains the large price difference between European and U.S. pricing. U.S. pricing starts at $67,400 for the 60 kWh model.
Blankenship also confirmed that the 40 kWh model won’t be available in Europe, at least initially–Tesla may choose to sell it in Europe at a later date.
Tesla will also offer deductions of €1,700 ($2,250) to buyers who already hold a Model S reservation in Europe, or plan to do so by the end of December. Buyers will need to finalize their order within four weeks of receiving their “Invitation to Configure” from Tesla.
Model S Signature models will start arriving by late Spring, and non-Signature car deliveries will start in Summer 2013.
If you want a Nissan Leaf then getting one before the start of January could net you a hefty cash-back offer right now.
Some Nissan dealers are advertising a $9,775 cash-back offer direct from Nissan Motor Acceptance Corp (NMAC), Nissan’s car finance arm.
The offer has been running since the start of December, and ends on January 2, 2013.
Details on the offer through the dealer websites are limited, but the offer appears to apply solely to lease customers.
The cash-back deal should clear Nissan’s current stock of Leaf models, before the updated 2013 car is revealed at January’s Detroit Auto Show.
Full details for the 2013 Leaf haven’t yet been revealed, though the new model is set to include a cheaper model with lower equipment levels than the current Leaf SV.