Tesla's Annual Loss Triples as It Prepares to Launch the Model S


Building a car company from scratch isn't easy, and building one that makes only electric cars when the market for electric cars is tiny is even more challenging. Tesla Motors (TSLA), which went public with much fanfare last June, nearly tripled its losses for 2010 as it invested heavily to engineer and get ready for producing the Model S, its second offering and the first that targets a broader consumer market.

The Palo Alto, Calif., company posted a loss of $154.33 million last year, compared with a loss of $55.74 million in 2009, it reported Tuesday. Tesla generated $116.74 million in 2010 revenue, which was slightly higher than the $111.94 million from 2009. For the fourth quarter of 2010, the electric-car maker reported a loss $51.36 million, or 54 cents per share, on revenue of $36.29 million. For the same quarter in 2009, Tesla posted a loss of $24.24 million, or $3.43 per share, on a revenue of $18.59 million.

The narrowing of the earnings per share from quarter to quarter is good news, and investors weren't surprised by the mounting losses. Tesla, which reported its financial results after the market closed, saw its shares inch up about 0.1%, to $22.86, in after-market trading.

The company is generating revenues mainly by selling its first model, a two-seat sports car that retails at over $100,000. The company started shipping the Roadster in 2008 and delivered 1,500 of them as of last quarter. It also brings in money from providing engineering services and selling the battery packs and powertrains to two key customers: Toyota (TM) and Daimler (DDAIF).

Lining Up Capital

Tesla doesn't plan to launch its second car, the Model S, until mid-2012. It's a four-door sedan that the company hopes will attract a wider set of customers. But the Model S won't be cheap: Tesla's initial estimate puts the sticker price at $57,400. Buyers can shave some of the cost by applying a $7,500 federal income tax credit.

Sponsored Links

Over the past year, Tesla has had to scramble to raise money and invest in production equipment and space to bring the Model S to market. The company held an initial public offering last June and raised about $226 million in what was the first IPO for an American automaker since 1956. Tesla also scored $465 million in loans from the U.S. Energy Department to engineer and assemble the Model S and to build a related powertrain factory at headquarters in Palo Alto.

Last May, Tesla bought a defunct assembly plant jointly owned by Toyota and General Motors (GM) in Fremont, Calif., to assemble the Model S. Toyota then invested $50 million in Tesla (before the IPO) and contracted with the company to design a powertrain system for an electric RAV4. Tesla expects this development deal to generate $69 million in revenue.

Panasonic (PC), which sells lithium-ion battery cells to Tesla, bought $30 million of Tesla's private shares last November.

In-House Capabilities

Tesla's survival depends heavily on the success of Model S. The company has decided, at least for now, that it will learn to assemble virtually the entire car by itself rather than outsourcing some of the production. This strategy is crucial to ensure that Teslay has more control over the entire manufacturing process and to fend off any last-minute attempts from subcontractors to raise prices, said Tesla CEO Elon Musk during the conference call.

"The basic philosophy is if we need, we can do almost anything in-house," he said. "We don't expect to do everything in house -- that'd be foolish. But to have that ability is incredibly helpful."

Tesla said it has received over 3,700 reservations for the Model S.

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