Tesla Scores Another Profitable Quarter With Stable Margins and Improved Cash Position



Tesla CEO Elon Musk just contributed the quarterly earnings forecast in a”pivotal year” with continuing gains, steady margins, improved cash-on-hand and an optimistic prognosis for 2019. 

Musk called it the”most successful year in Tesla history” using the firm asserting an”80 percent market share of all electric vehicles in the U.S.” He expects Tesla's”nutty” development rate to continue in 2019 with a 50% increase over 2018.

Here are a few highlights:

Fourth-quarter GAAP net income was $139 million.

Cash and cash equivalents were $3.7 billion at the year, an increase of about $718 million.

Automotive gross margin decreased slightly to 24.3 percent in Q4 from 25.8% in Q3. Model 3 margin remained over 20 percent.   

Automotive revenue in Q4 rose by 4 percent sequentially over Q3 and by 134 percent when compared with Q4 2017.

Client deposits dropped by about $113 million to $793 million in Q4 as Model 3 backlog is being met.

The company's fourth-quarter earnings fell short of expectations.  Tesla delivered corrected earnings of $1.93 per share in Q4, falling below consensus estimates of $2.14 per share, according to Bloomberg data.  But, Tesla surpassed expectations on Q4 revenue at $7.23 billion, ahead of the $7.07 billion estimated.

In 's earnings trailer , we asked some questions regarding how Tesla's company was evolving. Now, Tesla answered most of them.

What's the need for Model 3?

Tesla ought to be allowed to brag somewhat, announcing that with almost 140,000 units offered, Model 3 was”the best-selling premium vehicle (including SUVs) in the U.S. for 2018 — the first time in decades an American carmaker has been able to secure the top spot.”

However, Tesla pulled all the stops to produce a list 90,700 cars last quarter — and the first quarter of 2019 could suffer with the hangover of the shipping pull-in. Tesla has begun its Model 3 shipping efforts from Europe and China, however, faces the headwinds of transportation, homologation, fresh supply components, and tariffs. 

“While the number of Model 3 vehicles produced should increase sequentially in Q1, deliveries in North America during Q1 will be lower than the prior quarter as we start delivering cars in Europe and China for the first time. As a result of the start of Model 3 expansion into Europe and China, deliveries will be lower than production by about 10,000 units due to vehicle transit times to these markets,” according to the organization 's earnings letter.

Musk expects Model 3 production volumes in Fremont to rise during 2019 and reach”a sustained rate of 7,000 units per week by the end of the year,” adding into any Model 3 generation at the Shanghai Gigafactory.

As for the Model Y,  Tesla will start tooling for a new crossover, targeting volume manufacturing by the end of 2020,”most likely at Gigafactory 1,” Musk said.

He added that “the market opportunity for the Model 3 in Europe and China exceeds North America.” 

How is Tesla going to cover its new products?

Tesla's cash position lets it the space to settle its 920 million March bond.

The Shanghai Gigafactory is predicted to”go up like lightning,” in accordance with Musk, together with local Chinese funding and an estimated price of $500 million. Tesla notes that the”acquisition of land in China is a 50-year lease from the Chinese government.”

Capital expenditures, such as the China land-acquisition charge, have been $2.24 billion in 2018. Tesla expects 2019 capex to be about $2.5 billion and also adequate to fund”Gigafactory Shanghai, Model Y and Tesla Semi, as well as for the further expansion of our Supercharger, service and retail networks,” the earnings letter states.

Because the Model Y is going to be constructed on the Model 3 stage, it has about 75% of its components in common with the Model 3. Therefore,”the cost of the Model Y production line should be substantially lower than the Model 3 line in Fremont, and the production ramp should also be faster.”

Service and autopilot update

Tesla continues to create bold claims about its autopilot abilities and its “Navigate on Autopilot” attribute. Musk spoke of this”profound” experience that permits:”On most controlled-access roads such as highways, any Tesla vehicle with Enhanced Autopilot [can] change lanes, transition from one highway to another, and ultimately exit the highway when approaching the final destination.”  

During Q4, Tesla opened 27 new shop and support places, for a total of 378 places worldwide. Musk named improved customer service as one.   

Energy and solar businesses

Tesla's energy storage company built among the world's largest batteries in 2018, while deploying a total of 1.04 gigawatt-hours of energy storage, an astonishing tripling of its 2017 figure. Tesla's letter claims that”a better supply of cells and new manufacturing equipment” will increase storage deployments into”over 2 gigawatt-hours in 2019″ with increasing profitability. 

Energy generation and storage revenue dropped in Q4 by 7% over Q3 and gross dropped appreciably”due to the typical seasonal decline in solar energy production and correspondingly lower lease revenue in the winter months, Solar Roof ramp cost, and a higher mix of lower-margin energy storage business.”

Tesla deployed 73 megawatts of solar panels last quarter, 21 percent down from the previous quarter, exceeding a 38 percent plateau in 2018 into 326 megawatts. Based on data from Wood Mackenzie Power & Renewables, Tesla’s home solar installation market share has dropped from 33.5 percent a couple of years back to 9.1 percent, enabling Sunrun to clinch the title of economy pioneer .

However, Tesla seems to be arguing that this is a portion of this plan, a result of its new, more selective storefront sales strategy and the improved financials of cash and loan revenue, which made up 75 percent of home deployments from Q4. Last year, Tesla reduced the prices of its solar panel installations with $3,000 to $5,000 a roof — an outcome, Tesla asserts, of its improved channel efficiencies. 

The Solar Roof product is on a roll. Two decades after its debut, after having obtained deposits from curious homeowners, Tesla has connected just a dozen or so solar-integrated roofs into the grid. Tesla plans to ramp up the production of this Solar Roof with”significantly improved manufacturing capabilities during 2019″ — roughly three years following its unveiling.

Elon's bright outlook      

Elon Musk is optimistic. He also 's optimistic about being profitable in the current quarter”and all quarters going forward.” He expects Model Y volume to be greater compared to Model 3. He considers that Tesla's”growth opportunities are massive.”

This 's some advice for 2019:

Energy generation and storage revenue and margin are predicted to increase considerably in 2019, pushed by the storage side. Solar deployments in Q1 will likely be marginally lower compared to Q4.  

Operating expenses will increase by less than 10 percent this year,”creating massive leverage given the top-line growth in 2019.”

The goal is to reach”a very small GAAP net income in Q1,” but that will require implementation”on many fronts including handling, logistics and delivery challenges in Europe and China.”

Tesla seems to send 360,000 into 400,000 vehicles in 2019, up 45% to 65 percent over last year, along with optimistic GAAP net earnings and positive cash flow”in every quarter beyond Q1 2019.”

Tesla's last statement on the call was that CFO Deepak Ahuja is rising, to be replaced by Zachary Kirkhorn, who previously served as the organization ’s vice president of finance.

In general, this was yet another strong quarter to the automaker, along with a cautiously optimistic prognosis for 2019.  Tesla shares are down 5 percent on the good news.


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