Posted on October 27, 2016 by Matt Pressman
With Tesla Motors [NASDAQ: TSLA] CEO Elon Musk calling this Tesla's best quarter ever, the numbers don't lie. According to the Tesla's Q3 Shareholder Letter and corresponding conference call*, Musk wrote that Tesla had: "GAAP net income of $22 million and positive free cash flow of $176 million [with] record vehicle production, deliveries, and revenue." Yes, Tesla had it's first-ever profitable quarter on a GAAP basis. Big news. To put this 3Q earnings announcement into some perspective: "Total Q3 GAAP revenue was $2.30 billion, up 145% from Q3 2015." And Musk sees the trend continuing, "we expect this to continue into Q4 and project positive GAAP net income." Tesla's stock jumped more than 4% in after hours trading at the time of this writing. Let's dive into some key takeaways.
Above: Tesla's formidable line-up coming next year (Image: Motor Trend)
Tesla Model S
Sales of Tesla's Model S finished at 16,047 units. The Model S has 32% market share of the top 12 large luxury automakers (beating the likes of Mercedes, BMW, and Audi) thanks to the car’s 60% year-over-year sales gain in the US. Of significant interest, Musk emphasized "high demand" for the 100kWh packs and sees it as a personal "priority" for the production team in the fourth quarter — claiming his internal meeting following the earnings conference call was on that very topic.
Above: Tesla Model S (Instagram: @teslamotors)
Tesla Model X
Sales of Tesla's Model X finished at 8,774. And, the Model X is also, "gaining market share, already growing to 6% of the U.S. large luxury SUV market in Q3, or #8 in the large luxury SUV category, edging out the Porsche Macan and Cayenne, the Land Rover R-R Sport and the Infiniti QX80. The large luxury SUV category is three times the size of the large luxury sedan category in the U.S., and represents a huge opportunity to further increase Model X sales." Furthermore, early Model X glitches have gotten ironed out as issues are way down having fallen: "by 92% in the last 12 months, a reflection of the improvements we have made... to react quickly to issues."
Above: Tesla Model X (Instagram: @edoll_and_us)
Tesla Model 3
Things look like they're on track with the much-anticipated Model 3: "For Model 3, we have completed production line layouts and will soon begin installation of new body welding and final assembly lines... we remain on plan for our timing, volume, vehicle capability, pricing,and margin targets." Musk cited "limited physics manufacturing" as his disruptive strategy for Model 3's huge production ramp ahead. Musk wouldn't comment on reservation numbers but noted that Tesla isn't marketing the Model 3 at all. He said, "we anti-sell the 3 when someone comes to our store" — instead trying to turn the customer's attention to the Model S or X instead.
Above: Tesla Model 3 (Image: Learn Bonds)
In perhaps the most colorful part of the conference call, without naming names (ahem, Mobileye) — Musk called third-party supplier claims about Tesla's Autopilot "bull****" and said, "there are skeptics out there, I suggest they do not bet against us." He touted Tesla's industry-leading fleet data with, "1.3 billion miles logged by [Tesla] vehicles with Autopilot hardware." And, Musk said he'd be "happy to open up our data with competitors to improve safety." In addition, Musk continues to promise, "new safety and convenience features [which] will be rolled out via over-the-air software updates."
The next most colorful part of the call came when Musk was asked about the "Tesla Network" — Tesla's still-to-come car sharing plan — he laid down the gauntlet: "Sometime’s it’s been characterized as Tesla vs. Uber, or Lyft, or something like that. It’s not Tesla vs. Uber, it’s the people vs. Uber." Looks like Tesla's model for car sharing will take a lower percentage of revenue than Uber. This could get interesting.
Above: Looks like Tesla and Uber will be facing off with one another (Image: Gas2)
With the upcoming product demonstration event (this Friday) where Tesla plans to unveil an integrated solar roof with next-generation energy storage and charging, Musk noted in the letter, "With the previously announced plan to acquire SolarCity, we look forward to making solar as compelling as electric vehicles... [and] the combined company is expected to achieve over $150 million of direct cost synergies in the first full year post-close." He also teased Friday's announcement a bit by saying the solar roof looks better than a normal roof "exceeding my expectations."
All in all, it looks like Tesla is poised to hit its year-end targets with 80-90,000 Model S and Model X vehicles delivered, Model 3 production firmly on-track, Autopilot rapidly improving, car sharing advances fast-approaching, and SolarCity merger happening by end of year. All while adding stores, service centers, superchargers, demonstrating Gigafactory growth and Tesla Energy penetration. Lots of action here in Tesla land. As always, we'll keep you updated on the news.
If you missed it, here's the recording* from the conference call...