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Tesla Motors to post its first profit

Tesla sold more of its electric cars than expected in the first three months of the year, and it adjusts its first-quarter guidance to 'full profitability.'

April 02, 2013|By Ronald D. White, Los Angeles Times
  • Tesla sold about 4,750 of its electric Model S sedans in the first quarter, beating expectations. Above, a Model S is displayed at the New York Auto Show last week after winning a green car of the year award.
Tesla sold about 4,750 of its electric Model S sedans in the first quarter,… (John Moore, Getty Images )

Tesla Motors Inc. is poised to turn a profit for the first time, based on stronger-than-expected sales of its premium electric cars.

The Palo Alto automaker sold about 4,750 of its Model S sedans in the first quarter, about 250 more than it projected in February. The automaker on Monday predicted "full profitability" in an amendment to its guidance for first-quarter performance.

"There have been many car start-ups over the past several decades, but profitability is what makes a company real," Tesla co-founder and Chief Executive Elon Musk said in a statement. "Tesla is here to stay and keep fighting for the electric car revolution."

The first-quarter sales were nearly twice the number of cars Tesla sold in the fourth quarter of last year, the automaker said. Tesla started delivering the Model S in June. It sold about 2,650 cars in all of last year, 2,400 of them in the fourth quarter, once it ramped up production. The Model S prices start around $60,000 and run to nearly $95,000.

Wall Street analysts called the Tesla announcement a significant development.

Tesla's news was "further evidence that the company continues to make solid progress on streamlining its manufacturing operations, and product demand remains strong," Sanjay Shrestha of Lazard Capital Markets said in a note to investors.

Tesla's improving outlook contrasts sharply with the declining fortunes of rival California electric carmaker Fisker Automotive Inc. Last week, Fisker said it hired Kirkland & Ellis, a major bankruptcy law firm, to review its options while it continues to seek investment partners.

At the lower end of the electric car market, Nissan is seeking to boost lackluster sales of its electric Leaf by cutting the base price to $28,800 on an entry-level S model, $6,400 less than the cheapest 2012 Leaf. Nissan is also offering special lease deals.

"We're cutting prices just as fast as we can cut costs," Carlos Ghosn, global CEO of Nissan and Renault, said Monday. "The head winds are price and range anxiety.... What would really help is more charging infrastructure in urban areas."

Still, early sales of electric vehicles compare well with early sales of gas-electric hybrids, Ghosn said, and he's bullish on the future. "When you look at the challenges we are facing — including the price of oil, emissions pollution and global warming — electric cars are the answer."

Sales of electric cars barely register as a percentage of U.S. auto sales. Sales of hybrids represent about 4%, although that share is growing with the introduction of many new hybrid models.

Tesla has had its struggles, including delays in model introductions and worries about financing, but recent sales show it may finally be gaining traction in the marketplace, analysts said. The strong sales report reduces concerns that Tesla would need another influx of cash this year, said Elaine Kwei, an analyst with Jefferies & Co.

"There were people that probably expected it to go the way of Fisker," Kwei said. "They have already gotten a lot farther than most people would have expected."

At least one observer said Fisker's woes aren't necessarily a plus for Tesla.

"Ultimately, more competition is a good thing," said Alec Gutierrez, senior analyst for Kelley Blue Book. "Fisker's troubles could send the message to some people that the electric car is just not ready."

Tesla Motors, founded in 2003, started selling its Roadster convertible sports car in 2008. Production for the Roadster ended in 2011, and North America sales ended last year, just as the company was rolling out the Model S.

In March, Tesla announced it had again pushed back the release of its next vehicle, the Model X crossover SUV, by a full year to late 2014. A company spokesperson said at the time that Tesla had decided to focus instead on the Model S.

The electric car still faces significant challenges.

A recent report from the National Research Council, for example, said that "limited range and long recharge time are likely to limit the use of all-electric vehicles mainly to local driving. Advanced battery technologies are under development, but all face serious technical challenges."

Other reports have noted that many consumers worried about high gas prices are still more likely to turn to cheaper, smaller gasoline-powered cars than electric cars.

But Tesla continues to gain credibility, analysts said.

"Tesla has significant hurdles to reaching sustainable profitability, including ongoing cost improvement, roll-out of a new product line and demonstrating success in Europe and Asia," said Colin W. Rusch, senior analyst for Northland Capital Markets. "That said, the company has made substantial progress in creating a world-class product and making efficient capital decisions. We believe they are getting credit for that progress in the market today."

Investors apparently agreed. On Monday, Tesla shares climbed $6.04, or nearly 16%, to $43.93.

ron.white@latimes.com

Times staff writer Jerry Hirsch contributed to this report.

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