Tesla (TSLA) Misses Q3 EPS by 2c; Delivered 11,603 Vehicles

November 3, 2015 4:03 PM EST

(Updated - November 3, 2015 4:05 PM EST)

Tesla (NASDAQ: TSLA) reported Q3 EPS of ($0.58), $0.02 worse than the analyst estimate of ($0.56). Revenue for the quarter came in at $963.8 million versus the consensus estimate of $1.26 billion.

The company said China was strong: "In China, our newest major market, Q3 Model S orders increased substantially from Q2, due in part to the opening of two new retail locations. We expect order growth in China to remain strong with more store openings and the recent policy changes in Beijing and other major cities that allow buyers of Tesla vehicles to bypass license plate restrictions."

  • Model X launch & start of deliveries
  • Autopilot released to 40,000 vehicles globally, over the air
  • Produced a record 13,091 vehicles, despite one week shut down
  • Delivered a record 11,603 new vehicles
  • Gigafactory construction and production ahead of schedule
  • Model 3 unveiling planned for late March 2016


In Q4, we plan to build 15,000 to 17,000 vehicles, and deliver 17,000 to 19,000 vehicles, which will result in 50,000 to 52,000 total deliveries for the year.

The company was previously looking for FY15 deliveries of 50,000 to 55,000 vehicles.

Model S production and deliveries are on track to achieve our initial Q4 plan. The primary limiting factor to higher Q4 deliveries is the near term ramp of Model X production, with the biggest constraint being the supply of components related to the second row monopost seats. To eliminate these supply constraints and achieve a better overall outcome, we have brought manufacturing of these seats in-house. In addition we, and some of our other Model X suppliers, are still ramping up and fine-tuning production. These factors add uncertainty to our build plans during Q4, but we feel emphasizing quality is the right decision for our customers.

We expect that Model X will achieve steady state production capacity during Q1 as we do not foresee any significant production, design or supply chain constraints that will impact this plan. Looking ahead, we still remain highly confident of average production and deliveries of 1,600 to 1,800 vehicles per week for Model S and Model X combined during 2016.

We expect our average vehicle sales price to increase slightly in Q4 with more deliveries of highly optioned Model X vehicles.

We expect Q4 Model S gross margin to improve sequentially, but initial Model X launch expenses and higher overhead and depreciation allocations will temporarily elevate total production costs in Q4. As a result, we expect non-GAAP Automotive gross margin to decline slightly from Q3. After Model X production stabilizes in Q1 2016, we expect Model X gross margin to improve rapidly and become comparable to Model S gross margin over the next several quarters, even as we launch a lower priced version of Model X with a smaller battery pack during 2016. Finally, we expect gross margin in Services and Other to remain positive, but to vary within a relatively wide band given the diversity of businesses reflected in this measure.

In Q4, we expect to directly lease about the same percentage of cars that we did in Q3. As always, we will use lease accounting for these cars even in our non-GAAP financial results, as such treatment is consistent with the cash collected on these transactions. We do not expect to sell any ZEV credits in Q4.

During the next several quarters, operating leverage should improve with revenue and gross profit both growing faster than operating expenses. Operating expenses should increase slightly in Q4, but reflect a further decline in Model X development expenses, offset by increased costs related to expanding our global sales capability and developing Model 3. We are on track to unveil Model 3 in late March 2016.

We plan to invest about $500 million in Q4, which will bring the projected total capital expenditures for this year to about $1.7 billion. The increase in spending is primarily due to accelerated investments in the Gigafactory, further vertical integration of seat assembly and other manufacturing activities, as well as faster milestone execution by certain suppliers for Model X manufacturing equipment and tooling.

Our customers drove their cars almost 250 million miles this quarter, for a total of nearly 1.5 billion miles to date. We are looking forward to the day when we can tell you how far our cars have driven our customers, and to the introduction of many more innovative products manufactured and sold globally.

For earnings history and earnings-related data on Tesla (TSLA) click here.

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