Tesla outlook, deliveries fall short amid capacity constraints

DETROIT Tue Nov 5, 2013 8:10pm EST

A Tesla model S car with an electric vehicle charging station is displayed during a media preview day at the Frankfurt Motor Show (IAA) September 10, 2013. REUTERS/Kai Pfaffenbach

A Tesla model S car with an electric vehicle charging station is displayed during a media preview day at the Frankfurt Motor Show (IAA) September 10, 2013.

Credit: Reuters/Kai Pfaffenbach

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DETROIT (Reuters) - Tesla Motors Inc (TSLA.O) forecast a weaker-than-expected fourth-quarter profit and posted third-quarter Model S deliveries that disappointed some analysts as the electric car maker struggled to meet demand because of limited capacity.

Tesla's stock fell more than 11 percent in after-the-bell trade following the results. Tesla shares closed Nasdaq trade at $176.81 on Tuesday.

During a conference call on Tuesday, Chief Executive Elon Musk said production has been curtailed by a lack of the lithium-ion battery cells required to power the Model S.

"It doesn't make sense to do things to amplify demand if we can't meet that demand with production," he told analysts. "We spend our time trying to figure out how do we ramp up our production faster."

Tesla's recent deal with Panasonic Corp (6752.T) should help ease the battery cell shortages. The company is also exploring the possibility of building a battery factory with partners, most likely in North America.

Tesla's fourth-quarter adjusted profit would be "about consistent" the third quarter, implying results would fall short of the 20 cents per share expected by analysts, according to Thomson Reuters I/B/E/S.

Tesla delivered more than 5,500 Model S electric cars during the third quarter. This was a record for the company, but still less than the 5,800 expected by analysts at Barclays Capital and Wedbush Securities.

The outlook and Model S deliveries overshadowed Tesla's forecast-beating profit for the third quarter. Tesla reported adjusted third-quarter profit of 12 cents per share, compared with the average analyst forecast of 11 cents. Adjusted revenue of $603 million also beat estimates.

"Results with somewhat slower ramp of Tesla S deliveries reinforce our view that Tesla (stock) had overshot in the past few months and is more properly valued at $141," Barclays Capital analyst Brian Johnson said in a research note.

Tesla forecast deliveries of slightly less than 6,000 cars in the fourth quarter. The Model S starts at $70,000 before a federal tax credit, although most are sold at $100,000 or more.

TESLA EXPLORES BATTERY FACTORY

Tesla shares have surged nearly five-fold this year, boosting its value above that of Italian automaker Fiat (FIA.MI), parent of Chrysler Group LLC.

During the call, Musk emphasized that the 10-year-old company is "different in a fundamental way" from larger, more established players because Tesla is still developing its manufacturing footprint.

Tesla launched its Model S electric car last year. It is preparing to introduce the Model X crossover late in 2014, with high-volume production aimed for the second quarter of 2015.

Next year, the automaker will begin design work on its third-generation electric car, which is intended for the mass market and will have a roughly $35,000 price tag.

A key hurdle to launching that mass market electric car in late 2016 or 2017 is today's inadequate lithium-ion battery supply, Musk said.

"There will need to be incremental production capacity that doesn't exist in the world today," Musk said of batteries. "We're in the process of figuring that out. There will need to be some kind of giga factory built."

Musk said he envisioned such a factory would build the battery packs from scratch, starting from raw materials.

(Reporting by Deepa Seetharaman; Editing by Leslie Gevirtz and Leslie Adler)

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