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Tesla Announces Its First Profit

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On: Tue, May 14, 2013 at 2:57PM | By: Chris Weiss

Tesla Announces Its First Profit

When it comes to building awesome, lust-worthy, high-performance electric cars, Tesla has experienced success for years. But when it comes to making money on those electric cars—like the 'more money than I spent to make money' type of money—it has had less success. It has failed to turn a profit for the entire 10 years that it's been in business. Until last week. In a letter to shareholders detailing its 2013 Q1 financials, Tesla announced its first profit ever.

"Tesla reached profitability in the first quarter of 2013 for the first time in our ten year history." is how Tesla started the letter. "We exceeded our own targets for deliveries, significantly expanded gross margin, and improved execution throughout the company. Excluding non-cash warrant and stock option items, we generated a profit of $15 million. Including those factors, our GAAP profit was $11 million. Importantly, we achieved profitability despite the benefit of a one-time accounting gain related to the DOE warrant."

A lot of dense financial talk in there, but the storyline is intriguing. Given the high costs of developing the low-volume Roadster and the Model S sedan, Tesla had always been operating at a loss, dumping investor money into its operations. With the success of the Model S, a car that is much cheaper and more practical than the Lotus-based Roadster two-seater, Tesla finally found a reason to pull out its black pen.

Tesla sold 4,900 Model S sedans in the first quarter, well above its forecast 4,500. To put things in perspective, that's nearly double the 2,500 Roadsters that it sold between 2008 and 2012. It says that production stabilization, a 40 percent decrease in the time needed to build a car, and inventory management improvement helped it to reach its profit. It is forecasting sales of 21,000 for the year, up from its initial goal of 20,000.

"Our goal has always been to make electric vehicles affordable to the mass market. The Model S is priced substantially lower than the Roadster and our third generation vehicle will again be priced much lower than theModel S," Tesla foreshadowed in the letter.

Past reports have suggested that Tesla's next car will be a smaller, cheaper passenger vehicle. It is also planning the Model X crossover and a next-generation Roadster.


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