Tesla Q2 Results

Ships over 5,000 cars.

Tesla reported net income increased by 70% Q on Q to $26M with an operating profit of 20 cents a share, including 15 cents related to a leasing program. Even without that provision, results exceeded the average of 10 analysts’ estimates for a 20-cent loss, according data compiled by Bloomberg. On its operating basis, Tesla said it will make money all year, even as it expands sales to Europe and Asia.

Q2 revenues were $551 million on a non-GAAP basis and $405 million on a GAAP basis. While deliveries increased by 5% from Q1, overall revenues were flat due to an expected drop in ZEV credit revenue. ZEV credit revenue fell to $51 million this quarter from $68 million last quarter. Vehicle average selling prices (ASPs) also declined slightly during the quarter since 60 kWh range limited cars sell at a $10,000 lower price point. These sales honour orders for the now discontinued 40 kWh battery pack. This temporary unfavourable product mix impacted automotive non-GAAP gross margin in Q2 by about 1 percentage point.

Other highlights from the Investors letter:

Over 13,000 Model S customer vehicles are now on North American roads and have logged nearly 60 million miles. With our recent $1 billion capital raise and subsequent repayment of the $440 million outstanding loan from the Department of Energy, our cash balance grew to almost $750 million during the quarter. Our financial position and balance sheet have never been stronger.

During Q2, we improved our production rate by 25% from 400 to almost 500 vehicles per week. 5,150 cars were delivered during the quarter, significantly surpassing our expectation of 4,500 deliveries.

At the same time, North American deliveries outside California grew at twice the rate of California deliveries this quarter.

This week we started our international expansion by delivering the first Model S vehicles to customers in Europe.

While we expect production to increase from Q2, a considerable number of vehicles produced during the quarter will be in transit to European markets at the end of Q3. As a result, we plan to deliver slightly over 5,000 Model S vehicles in Q3, and remain on plan to deliver 21,000 vehicles worldwide for 2013. We expect that Q3 ASPs will rebound from the Q2 level as we deliver European Signature Series cars and demand for 85 kWh cars remains strong.

Comments from pundits:

 “He’s very clearly managing all the moving parts that you have to manage to put together an effective car company,” said Karl Brauer, an analyst with Kelley Blue Book in Irvine, California. “For the people who can afford those cars, this car is very effectively lining up with their needs: an attractive premium looking and feeling, functional all-electric car.”

Musk also runs rocket maker Space Exploration Technologies Corp., known as SpaceX, and is chairman of solar-power provider SolarCity Corp. (SCTY)

“He’s proving his critics wrong,” Jack Ablin, who helps oversee about $66 billion as chief investment officer of BMO Private Bank in Chicago, said by phone. “He’s delivering on the top line, he’s selling more product. He’s able to extract a premium price for an electric car.”

Tesla’s Model S, priced from $69,900 before a $7,500 tax credit, received the highest rating ever from Consumer Reports, which praised its sporty handling and luxury interior. Musk said the sedan is winning customers who had owned Toyota Motor Corp.’s Prius and Daimler AG (DAI)’s Mercedes-Benz E-Class. Toyota and Daimler are investors in Tesla and buyers of its battery packs.

Model X

The company’s Model X sport-utility vehicle remains on track to begin sales late next year, Musk said, adding that its development is “swiftly rising” among the company’s priorities. The SUV will be priced about the same as the Model S, he said last month in a post on Twitter that has since been deleted.

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