Tesla Motors Inc (TSLA): Tackling The Manufacturing Issue

Tesla Motors Inc (TSLA): Tackling The Manufacturing Issue
Blomst / Pixabay

Last week, Tesla Motors Inc (NASDAQ:TSLA) disappointed some investors by lowering the full-year delivery estimates and further delaying the launch if its much-awaited Model X crossover. The company’s third-quarter revenue jumped 55% YoY to $932 million, beating the consensus estimate of $889.3 million. Non-GAAP earnings of 2 cents per share were also above the analysts’ projection of 1 cent a share.

Demand still far exceeds supply

The EV maker reduced its full-year delivery target from 35,000 to 33,000 due to factory shutdown in July, which affected deliveries. The company delivered 7,785 Model S units in the latest quarter. After delayed its Model X several times in the past, the vehicle was expected to hit the roads in spring 2015. But Tesla said at the Q3 earnings call that the SUV would be pushed back to the third-quarter of 2015.

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Contrary to reports that Model S demand is slowing, Elon Musk said that demand remains robust. The biggest concern for the company was manufacturing. If the demand were a problem, the company could do a lot of things to attract customers. For instance, the electric vehicle maker spends very little amount on advertising. The company spent just $9 million on advertising last year. Demand for its vehicles still far exceeds supply. That’s a good problem to have.

Tesla spending $350 million this quarter to boost manufacturing

To beef up production, Tesla Motors Inc (NASDAQ:TSLA) will spend $350 million during the current quarter. The company aims to achieve production capacity of 2,000 units a week by the end of 2015. Further, the company is simplifying vehicle options to make the manufacturing process smoother. The company said its target is to increase production by at least 50% YoY for the next several years.


Despite delaying the Model X launch, Tesla Motors Inc (NASDAQ:TSLA) issued strong delivery guidance for FY2015. The company said it expected Model S deliveries to grow 50% next year to 50,000 units. Note that Model X pre-orders have surpassed 20,000 units. The company didn’t provide guidance for Model X, but the demand should be strong when it hits the road.

In a research note to investors, FBN Securities analyst Shebly Seyrafi reiterate an Outperform rating with $325 price objective.


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