Tesla Motors Inc (TSLA): Will The Company Achieve Sales Target?


Tesla Motors Inc (NASDAQ:TSLA) is one of most innovative companies in the world, which has earned it investors’ admiration. The company’s earnings have only missed once in the preceding four quarters and topped in the other three quarters. The company is in the process of launching its Model X, which should play a key role in delivering the current year’s sales numbers. The electric vehicle manufacturer has an objective of 55,000 vehicle deliveries for 2015. Let’s look at some of the factors that could impact the results in their 2nd quarter earnings report. Tesla Motors Inc (NASDAQ:TSLA) will post its financial results for the second quarter, after market close on Wednesday, August 5, 2015.

Key Points

For the second quarter, Tesla Motors Inc (NASDAQ:TSLA) has delivered 11,507 vehicles, which was higher by 500 vehicles than expected. That represented about 52% year-over-year growth from the previous year quarter. In the first quarter, the company delivered 10,030 vehicles, indicating a 55% year-over-year uptick. That means the company delivered 21,537 vehicles in the first two quarters. This suggests that it is 21.7% behind the half-mark of 27,500 vehicles in the first half of the current year.

The second half will be burdened with a production of 33,463 vehicles. That means the company will have to deliver more than 16,500 vehicles in each of the next two quarters. While the launch of the Model X could ramp up the deliveries, the electric vehicle maker might continue to struggle to meet its targeted level of 55,000 vehicles. Therefore, the company might announce how it is planning to achieve its target.

Margins

In the first quarter, the electric vehicle maker disclosed a negative gross margin of 3.2% on its ‘services and other.’ However, it indicated better show in the June quarter due to its continued efforts to control costs on powertrains by approximately 5% by the fourth quarter. Higher sales of Tesla Energy, as well as pre-owned Model S vehicles, will also improve margins.

Tesla Motors Inc (NASDAQ:TSLA)’s gross margin and adjusted gross margin were 27.7% and 28.2% respectively in the first quarter. The company expected the second quarter to witness margin compression due to the strong dollar and weak average transaction prices for its Model S. The company’s June quarter results should not only give the indication whether it was on the expected lines but will also provide indication for the next two quarters.

Demand

The electric vehicle makers witnessed accelerated demand in Europe in the second quarter with deliveries increasing 13% over the first quarter. Model S orders in North American and Europe witnessed 30% and 60% year-over-year growth, respectively. In Asia, orders doubled. That was based on the CEO, Elon Musk’s, recent comments to the press. The order flow will benefit the third quarter deliveries.

Tesla Motors Inc (NASDAQ:TSLA) has also announced a referral program. It allows anyone giving orders for a Model S to get a $1,000 discount from the purchase price and the referring would get $1,000 from store credit only. That is probably an attempt to reduce its $2,000 spent per unit sold on advertising. The electric vehicle seems to prefer word-of-mouth advertising and offering discounts.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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