The electric car market has increased since the demand for such cars has been on the rise. People have started opting for this option since it is better than the expensive petrol or diesel cars. Further, premium car manufacturers such as Tesla Motors (TSLA, Financial) have generated more demand through their luxurious electric cars. Its efficient and innovative technologies attracted customers.
Thus, it is obvious that this car manufacturer is doing really well. It beat the earnings estimate in all of the last four quarters, and that, too, by a great amount. Further, its recently reported third-quarter results were not an exception. The numbers were way beyond analysts' expectations, making investors happy. However, a lowered guidance was a point of concern for many. Let us check.
Driven by great demand
Net revenue for the quarter almost doubled itself, clocking in at $852 million over last year's quarter. One of the primary drivers for this increase was higher Automotive Sales revenue, which drove the top line higher. A very interesting fact about Tesla is that it still has a higher demand than what it supplies. It also delivered a record number of Model S vehicles to its customers, during the quarter. The total number of Model S delivered was 7785.
Higher revenue resulted in higher gross margins. Margins expanded to 29.6% from 24.5% in the prior year. Moreover, the company registered earnings of $0.02 per share as compared to the estimate of a loss of $0.01 per share. Thus, the car maker is managing its costs pretty well.
The hiccups
Few points which disheartened the investors was a lower guidance and the announcement of a further delay in the delivery of the Model X crossover vehicle. Delivery of this new car is pushed further to the third quarter of 2015 from the earlier expectation of delivering it in the spring 2015. People are eagerly waiting for the new model for the company had started taking pre-orders in 2012. But the company claims that it will indeed deliver a better product even if it means delaying the production for some more time.
Facts to focus on
There are a number of initiatives taken by Tesla, in order to increase its production and meet the demands of the customers. It recently made system integration changes which resulted in a higher volume assembly line. Hence, deliveries rose 50% over last year, clocking in at 33,000 vehicles.
Moreover, the car maker plans to further ramp up its production capacity by 2,000 cars per week by the end of next year. This is indeed important since the company is expanding its wings overseas. It has started shipping cars in Japan and China. Expanding in China brings a lot of opportunities since it is the largest market for automobiles in the world. In fact, the automobile manufacturer expects that overseas sales will make 50% of the total revenue by next year.
Final words
The luxury market for cars has been increasing and is expected to grow 13% this year. Therefore, Tesla Motors seems to have a bright future. Also, its measures to expand in the international markets and efforts to increase production capacity should also prove to be fruitful. In addition, the launch of Model X should bring more gains. Therefore, this retailer should make for a healthy portfolio.
