Tesla (TSLA)... The Finance Company

August 4, 2016 12:37 PM EDT

Get instant alerts when news breaks on your stocks. Claim your 1-week free trial to StreetInsider Premium here.

With its earnings yesterday, Tesla (NASDAQ: TSLA) announced to investors that, like it or not, they are becoming more of a car finance company, at least temporarily.

Currently, Tesla customers can lease directly from Tesla or through its lending partners, with its partner making up the bulk of the leasing. As of March 31, 2016, the company had active leases for approximately 5,060 vehicles through their captive financing entities in the U.S. and Germany and approximately 9,200 vehicles through leasing partners.

Yesterday, the company disclosed that it reached their funding limit with a banking partner and as a result direct leasing is expected to rise from 8% of deliveries in Q2 to about 15% of deliveries in Q3. Tesla said it anticipates adding new partners.

It is important to note that Tesla offers a resale value guarantee program, under which customers may sell their vehicles back to Tesla at certain points in time at pre-determined resale value. Tesla warned in its past 10-Q that "unlike the resale value guarantee program or programs with leasing partners which do not impact our cash flows and liquidity at the time of vehicle delivery, under a lease held directly by us, we may receive only a very small portion of the total vehicle purchase price at the time of lease, followed by a stream of payments over the term of the lease."

They add, "to the extent we expand our leasing program without securing external financing or business partners to support such expansion, our cash flow and liquidity could also be negatively impacted."

Tesla also warns that not having financing options for customers on terms that are attractive could negatively impact sales, financial results and cash flow.

Investors better hope the company can get new and strong leasing partners on board before Model 3 sales start.



Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In





Related Categories

Corporate News, Insiders' Blog, Trader Talk

Related Entities

Tesla, Earnings, Model 3