Tesla Motors, Inc. - Third Quarter 2011 Shareholder Letter
• Start of Model S deliveries on track for no later than July 2012
• Model S customer reservations continue accelerating
• Supplier partnerships in place to achieve gross margin of 25% in 2013
• Total cash position improved from last quarter
• LOI from Daimler for a full powertrain for an electric Mercedes
• Multiple agreements signed for sale of Model S ZEV/GHG credits
• Full year revenue guidance raised to between $195M and $200M
Dear Fellow Shareholders,
We are pleased to report another quarter of strong performance. Total revenues in the third quarter were $58 million, up 85% from Q3 of last year. Automotive sales grew by almost 11% from last quarter due to solid Roadster demand and powertrain component sales. Total gross margin was 30%, our fifth consecutive quarter of achieving 30% or higher gross margin.
The highlight of the quarter was our Model S Beta reveal. We opened the doors of our Fremont factory during the weekend of October 1st to thousands of reservation holders, media and investors. Participants rode in Model S Beta vehicles and toured the Tesla Factory. They witnessed firsthand the progress we have made in developing the Model S and our manufacturing facility.
The Model S development program remains on schedule for first customer deliveries of the Model S no later than July 2012. In addition, we continue to have confidence in our long term target gross margin of 25% for Model S upon realizing the manufacturing efficiencies associated with an annualized sales run rate of 20,000 units.
Our non-GAAP net loss of $0.55 per share this quarter, or $0.63 per share on a GAAP basis, reflects our
continued investments in R&D and corporate infrastructure to support the launch of Model S. As we've discussed since our IPO, net losses will obviously continue until we reach volume sales of the Model S in 2013.
We are excited about the many bargains available for used tooling and equipment, some of which are located quite near to our Fremont factory. We believe in purchasing used tooling and equipment for pennies on the dollar and buying low cost desks from IKEA, rather than spending large sums of money on architectural and interior design.
...
Solid Powertrain Execution
We continued to execute well on our existing powertrain contracts during the third quarter. Our production agreements with Daimler and our development services agreement with Toyota produced combined revenue of over $29 million in the period. Powertrain component related sales accounted for almost $15 million this quarter, a new quarterly revenue record. We still expect to complete all deliveries under the Smart fortwo and A-Class programs on schedule by the end of this year.
We continue to make good progress on the development of the RAV4 EV with Toyota. Once again, we met all of the milestones planned for the quarter in the development contract for the RAV4 EV's full powertrain system. This drove solid development services revenue of over $14 million for the third quarter.
Overall,the RAV4 EV development program remains on schedule and should be completed by early 2012, as planned. Thereafter, we plan to begin shipping complete powertrain systems for the RAV4 EV to Toyota, under a multi-year contract of approximately $100 million.
We are also pleased to announce the receipt of a letter of intent from Daimler for a full powertrain program for a vehicle in the Mercedes line. Details of this deal remain confidential, but will be announced in the coming months.
