By on November 7, 2014

Tesla Model S at Tesla HQ

Tesla’s Q3 2014 earnings report had a few pluses (record deliveries of the Model S, high demand for the D trim sedans) and minuses (the third delay of the Model X, removal of brown and green from the Model S palette). The biggest minus, however, was its bottom line: A net loss of $75 million in GAAP income.

AutoNews reports the loss in Generally Accepted Accounting Principles income is double what Tesla lost in Q3 2013. Cash on-hand also decreased in the quarter, falling $304 million to $2.4 billion. Non-GAAP net income was $3 million, or just 2 cents per share based upon 142.7 million diluted shares.

Overall income from the 7,785 units delivered this period came out to $932 million in non-GAAP income, $852 million once GAAP is applied. Regulatory credits totalled $93 million, with $76 million in ZEV credits, thanks to the closure of additional contracts with a number of OEMs.

R&D spending climbed 28 percent over the previous quarter, hitting $119 million non-GAAP, $136 million GAAP. The expenses came as a result of work on the oft-delayed X, the D’s dual-motor drivetrain, and the new Autopilot semi-autonomous driving system.

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67 Comments on “Tesla Loses $75M In Net GAAP Income In Q3 2015...”


  • avatar
    Lie2me

    Some people have a hard time understanding this

  • avatar
    Pch101

    A correction to the above: The net income is negative, but revenues are positive. “Revenue” is not the same thing as “net income.”

    • 0 avatar
      Mike999

      Another correction, Tesla didn’t Lose anything:
      “Overall income from the 7,785 units delivered this period came out to $932 million in non-GAAP income, $852 million once GAAP is applied.”

      $80 Million didn’t qualify as GAAP income.
      That’s not an actual loss.

  • avatar
    Cobra427

    Let me preface by saying that I am highly impressed by what Elon Musk and Tesla have achieved, particularly with their signature product, the Model S. A truly remarkable accomplishment, the Model S has achieved parity with the world’s best cars, and all this from a small, dedicated group of ambitious, talented individuals.

    That said, I also see Tesla going the way of Duesenberg, Pierce Arrow, and Stutz…all great marques that elevated the state of automotive design and engineering, but ultimately are economically unsustainable. Without government handouts, their survival depends on being absorbed by an OEM like Toyota.

    • 0 avatar
      Lie2me

      I agree, to a point. Until battery technology takes a giant leap forward EVs have hit a plateau and will start to tank. I’m not sure what real value Tesla will have, because as Pch101 has previously pointed out, if and when battery tech takes that giant leap forward any auto manufacturer can make a EV in short order

      • 0 avatar
        jpolicke

        Any auto manufacturer could build an EV today with the same battery tech that Tesla uses, and ought to be able to make a car at least as good for less money. Tesla has demonstrated that there is a market, but no one else wants to compete for it.

      • 0 avatar
        ckb

        “Until battery technology takes a giant leap forward EVs have hit a plateau and will start to tank.”

        How about continuous incremental improvement? Battery capacity is increasing by around 6%/year. That gets us to double current capacity in about 10 years without any major breakthroughs. The reason you don’t notice is because they keep making your phone thinner. If the new iphone was as thick as the original it would probably last over a week. The battery for my lawnmower (yeah thats right) gets enough charge in 20 minutes to cut my entire 1/3 acre yard. The technology is ready, it just needs to be used.

        • 0 avatar
          Pch101

          If batteries improve to the point that they become viable for mass market cars, then the mass market automakers can build them at that time. There’s not much reason to be early, when making an EV is not challenging to companies that know how to engineer cars.

          • 0 avatar
            stuki

            +1

            This my main concern with Tesla as a business as well: Batteries are complex and hard to duplicate. Modern cars are complex and hard to duplicate. But given those two, the electric driveline allowing the former to propel the latter, is pretty simple and mature technology. As is, honestly, Ipads and their dash mounting brackets.

    • 0 avatar
      HerrKaLeun

      Since they sell high-margin luxury cars they may be able to make it along with the Gigafactory.

      Most all new models create losses for some years. Like the Mini didn’t become profitable untill end of first generation and that even beat BMW own predictions.

      They have enough cash for some years and with more models and cheaper batteries they will look good.

      • 0 avatar
        Lie2me

        “They have enough cash for some years and with more models and cheaper batteries they will look good.”

        Haven’t we recently learned that coming out with “more models” is becoming an issue?

  • avatar
    petezeiss

    Insanely great.

  • avatar
    chaparral

    If they’re showing a profit, they are doing it wrong. They need to be using as much of their revenue as they can as well as all the capital they can raise to hit the development timelines for the X and 3, and expand production capacity to be able to keep up with demand.

    • 0 avatar
      heavy handle

      +1

      If they were GM, they would take the money and run. Instead, they are investing in new and better products and technologies.

      They have enough cash to keep this going for 8 years (losing 75 million per quarter), so there’s a good chance the R&D will pay-off before they run out of money.

      • 0 avatar
        JMII

        Isn’t this what Amazon keeps saying after they report record loses… again & again?

        • 0 avatar
          Dr. Kenneth Noisewater

          Barring the occasional misstep or screwup (like the Fire phone), it seems to be working for them.

        • 0 avatar
          wolfinator

          And when Amazon folds up shop and disappears, you will have a legit criticism.

          But in the meanwhile, stock holders have shown that they will literally wait for a generation for profits to show up, all the while getting diluted.

          I have no problem with building an entire company on the backs of naive Wall Streeters who think big profits are just around the corner…

        • 0 avatar
          Mike999

          They also report record “Market Share”.
          They also are negatively effecting brick and mortar retail store sales.

      • 0 avatar
        Dr. Kenneth Noisewater

        Indeed. Tesla is a growth company, legacy automakers are not.

        How’s their bond yield vs, say, comparable term USTs?

      • 0 avatar
        Pch101

        You have it backwards. Tesla doesn’t spend enough on R&D; it should spend more, but it can’t afford it.

        The company should already be working on the replacement for the Model S; if anything, that work should have begun not long after the first Model S was released. But not only does that not seem to be happening, but they are also behind schedule on developing the other vehicles in the lineup.

  • avatar
    Lie2me

    Side note: I saw something yesterday that still has me scratching my head, while sitting at a light I watched a Tesla pull into a gas station and up to a pump… The light turned green before I could see what happened next. I’ll always wonder.

  • avatar
    Lie2me

    S*de note: I saw something yesterday that still has me scratching my head, while sitting at a light I watched a Tesla pull into a gas station and up to a pump… The light turned green before I could see what happened next. I’ll always wonder.

  • avatar
    STRATOS

    Wall street is peddling Tesla cars like their scam stocks.Company merits hugely overstated.

  • avatar

    What Tesla has done so far is no small feat. As a fan of electric cars I am glad someone has made them cool and desirable. My problem with Tesla is their relentless pursuit to be a $30B+ company when they are at best a $3B boutique car maker. It is currently at 95% PR and 5% manufacturing. Everything about Tesla is pie in the sky overly optimistic projections, completely disconnected from reality.

    “An electric drivetrain has so few moving parts, they will literally last 2 million miles or more”
    Hundreds had to be replaced, many at 10,000 mile intervals and none have lasted 50,000+ miles on the same driveunit so far.

    “The Model X will outsell the Model S, because luxury suvs outsell luxury cars”
    The Model S is a sleek super sedan unlike any in that price range. The Model X looks like any other crossover. Luxury crossovers are bought by women and I doubt many are interested in electric propulsion.

    “The Chinese love luxury cars and Tesla will be in high demand”
    The rich Chinese get driven around. Tesla is a driver’s car. Anyone following the auto industry knows that Electrics/Hybrids sell poorly outside North America.

    Sales are up as they expand to new markets but will soon run out of new markets and enthusiasts. Tesla’s valuation expects them to sell 500,000 cars a year at 25% net margins. Those who follow the car industry know this is impossible. Tesla is not a tech company. It is not a software company that can sell $50 dollar software on a 20 cent DVD. The ‘Church of Elon’ or anyone holding Tesla stock by 2018 are in for a rude awakening.

  • avatar
    SCE to AUX

    The anti-Tesla parade here is getting so predictable it’s funny.

    GAAP
    non-GAAP
    stock price
    overvalued
    ego
    every mfr could do this
    etc, etc.

    • 0 avatar
      Pch101

      Sorry if the truth offends you.

      (I would add that at this stage of the business, Musk’s ego is a benefit to the company.)

      • 0 avatar
        SCE to AUX

        I’ll be sad if the company goes under, but at the moment I find the litany of criticisms amusing, because the critics don’t change their predictions – only the timeline – as the company grows like crazy.

        • 0 avatar
          wolfinator

          In the right economic environment with loose credit, a company can survive for nigh a decade with sufficient optimism and charisma at the top.

          I really don’t get why Musk sticks in so many people’s craw. He’s got bondholders and stockholders who are happy to give him money to do what he’s doing. Either it works out long-term or not.

          Unless you hold stock, who cares?

      • 0 avatar
        wolfinator

        Musk’s ego is so big, it’s literally spawned 4 multi-billion dollar businesses.

        His ego is truly something to behold.

  • avatar
    northshorerealtr

    Is there an “extra” income that comes in from the sales? If I did the math correctly, non-GAAP income per car is $119,717 per car. (GAAP income per car is $109,441.)
    I thought most Model S’s sold in the $85-100K range.
    Do they routinely sell for more than sticker? And, if so, how are those extra sales profits handled?
    Guess I’m really asking what other income streams are rolled into that figure. And, certain that those income figures are before deductions for manufacturing costs.
    (Yeah, I haven’t had enough coffee today, and yeah, I haven’t closely exampled the company’s statements–being lazy!)

  • avatar
    Hummer

    There is a fundamental problem here, it is absolutely impossible for anyone not in the top 10k richest list to start a auto company.
    The requirements to sell vehicles is so long that it would be impossible to even build a prototype that could pass regulations for under a million dollars.
    And as time goes on, and automakers keep merging and destroying brands, eventually we’re going to have 3-5 companies controlling all major brands.

    I want to see Tesla succeed only because Elon is breaking into a market that’s almost uncrackable for new entries, and facing uphill battles every step of the way by companies with multiple times the cash and power, all with drastically more auto sales. Though it’s upsetting seeing even a billionaire having such struggles.
    I don’t know if electric cars are the way to win entry into the market, and so far it seems more like a fad than a legitimate entry, but I’m glad to see someone do it.

    It would be nice to see regulation aimed at protecting start-ups.
    Say under 10k sales company wide, minimum requirements, 1980 level emissions, 2000s safety, no backup cameras or other wasteful requirements.
    And gradually increase requirement levels with increasing company wide sales.
    Though I believe a truly successful and exciting idea would have a larger company waiting with a bag of money lined up to buy the rights to your idea, see AM General.

  • avatar
    baconator

    GAAP numbers are basically as objective as poetry. Cash is king. And what their cash flow statement tells you is that the company brought in $29 million in cash from operations over the quarter. $29M in free cash flow is nothing to sneeze at.

    • 0 avatar
      Pch101

      Cash flow from operations can be managed simply by deferring R&D. Judging from the product delays, that’s exactly what Tesla is doing.

      That’s prudent in the short run, but not sustainable over the long run. The company will need to produce sufficient profit to feed the need for investment, a problem that gets to the heart of why independent automaking is likely to produce losses or only minimal profit.

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