* Reports net loss in first quarter
* Has letter of intent with Panasonic for battery factory
* U.S. battery plant to reach full production rate in 2020
* To begin selling Model X crossover in 2nd quarter 2015
(Adds details, Musk comments, updates stock movement)
By Ben Klayman
DETROIT, May 7 Tesla Motors Inc, led by
billionaire Elon Musk, on Wednesday offered an outlook for the
second quarter that disappointed some investors, sending shares
of the electric car maker down more than 7 percent in
Tesla posted a higher-than-expected first-quarter operating
profit and said its operating automotive gross margins in the
current quarter would increase slightly. S&P Capital IQ analyst
Efraim Levy called the outlook a disappointment, saying
investors had hoped for something better.
The Palo Alto, California-based company reported a
first-quarter net loss of almost $50 million, compared with its
first quarterly profit a year ago.
Tesla said it would spend up to $850 million this year to
boost production capacity of its Model S luxury electric sedan,
develop the Model X crossover vehicle and start construction of
a new lithium-ion battery plant, dubbed the "gigafactory." It
said that would leave the company with a negative free cash flow
Like other so-called momentum stocks, Tesla's shares have
fallen recently and at the close of the market on Wednesday were
down more than 20 percent from an all-time high of $265 in
mid-February. In after-hours activity, Tesla shares traded at
$186.60, after closing at $201.35.
The company said the project to begin production of
lithium-ion batteries at the gigafactory is on course for 2017
and the plant should reach its full production rate in 2020.
"We have not yet finalized the ultimate location for the
gigafactory and we are going to start work on at least two
locations in parallel in order to minimize risk of delays
arising after groundbreaking," Musk said in a letter to
shareholders posted online.
He later said on a conference call with analysts that the
company would break ground at the first location probably next
month, followed by the second site one to two months later.
The company has said it would choose the location for the
plant from Nevada, Arizona, New Mexico or Texas, and Musk said
on Wednesday that California was potentially back in the running
but still improbable given the state's more onerous regulatory
Tesla said in February it planned to raise $1.6 billion
through convertible senior notes to finance the factory.
Analysts have said it would require a capital infusion of $5
billion to $6 billion.
LETTER OF INTENT FOR BATTERY FACTORY
Musk said on Wednesday that Tesla had signed a letter of
intent for the factory with battery supplier Panasonic Corp
, but was still in talks with other potential partners.
Executives expect the Panasonic deal to be finalized later this
Panasonic would be the only company producing battery cells
in the gigafactory, but the supplier as well as other companies
would ship in cells from other plants, Musk said.
Analysts have said Tesla needs to get the plans for the
battery plant finalized soon if it wants to meet its 2017
Musk also said the company expects to begin selling Model X
crossover vehicles in the second quarter of next year.
Excluding one-time items, Tesla earned $17 million, or 12
cents a share, in the first quarter, two cents better than what
analysts polled by Thomson Reuters I/B/E/S had expected. The
results included a currency gain of $6.7 million.
On a net basis, Tesla lost $49.8 million, or 40 cents a
share, compared with a profit last year of $11.25 million, or 10
cents a share. Net revenue rose 10 percent from last year to
almost $621 million, while operating revenue was up 27 percent
at $713 million.
The first-quarter included no revenue from zero-emission
vehicle credit sales, as the company had forecast, and $12
million in other environmental credit sales. In the same quarter
last year, those totals were $67.9 million and $17.1 million,
Tesla said it delivered 6,457 Model S cars in the first
quarter, slightly above the 6,400 it had forecast in February.
It also reiterated its full-year delivery target of more than
35,000 cars, including a forecast of about 7,500 cars in the
Tesla also said battery cell supply will still constrain
company vehicle production in the second quarter but that
situation should improve in the third quarter. The company said
its production rate is now at almost 700 vehicles per week, up
15 percent from the end of the fourth quarter, and should rise
to 1,000 per week by the end of 2014.
The company started selling Model S sedans in China last
month and Musk said demand there was strong and the company
would have to open a plant in that country within three to four
years. He said it will also study opening a plant in Europe.
(Additional reporting by James B. Kelleher in Detroit; Editing
by Steve Orlofsky, James Dalgleish and Mohammad Zargham)