Tesla released their Q1 reports today, outlining millions in losses while trying to maintain optimism for the future. Within the Tesla shareholder letter, included below, they highlighted the mass-market appeal for their electric vehicles in astonishing pre order numbers for the Model 3, due at the end of 2017. Tesla touts their future mass market car as the biggest consumer product launch ever, citing $14 billion in future sales with over 325,000 reservations. In the present though, first quarter non-GAAP net loss decreased 34% sequentially to $75 million, or $0.57 loss per share based on 133 million basic shares, while first quarter GAAP net loss was $282 million or $2.13 loss per basic share. Analysts had predicted a non-GAAP loss of 58 cents per share for Tesla.
The overall record production levels achieved were expected due to augmented Model X production, however Tesla failed to 
reach their projected level of deliveries for their new SUV. Instead, spiked interest in the Model S accounted for the increase, as orders were up 45% from Q1 last year. The company promises to be making significant progress in increasing production and plan to continue increasing total vehicle production to support over 50,000 deliveries in the second half of this year. Continuing to ramp high quality production is the top priority at Tesla right now. Additionally, Musk affirms their goal of 80,000 to 90,000 deliveries this year. It remains to be seen if Tesla can deliver on this lofty goal. This will have major implications for the future production timeline for the Model 3 and the future of Tesla as a whole. Tesla will have to prove to investors and the industry that it deserves its market value of $31 billion.
Telsa Shareholder Letter (pdf)
Recently Tesla has derived its profits in large part by selling its emissions credits under a Cap and Trade system. This, however, is not a sustainable business model in the long term given Tesla’s inability to turn a profit selling cars. If Tesla continues to lose money and fail to meet production goals it probably won’t be able to release the produce the anticipation Model 3 in quantities necessary to turn the company around.
I find it interesting that Tesla has shown negative profits despite the increased hype received by the company in light of recent news of the Tesla Model 3 and the Bioweapon Defense Mode marketing ploy that Elon Tusk has recently pandered to the environmental community. Tesla needs to dramatically improve its production and sales if they want to meet quarterly profit figures that satisfy their investors and put them in good financial terms. I agree that the company will have to prove that it is worth $31 billion dollars, but many valuations within private equity and finance are inflated beyond reality in the first place. It will be fascinating to see how Tesla pulls out a fast one in light of the recent news that they are down in profits recently.
Thomas Barnett
Moreover, this is a continuation of the trend of Tesla reporting quarterly losses. Also although the pre-orders on the Model 3 look enticing to potential investors we can see how Tesla managed to “mess up” its deliveries: ”Tesla said delivering some “cars was physically impossible due to a combination of customers being on vacation, severe winter weather and shipping problems (with actual ships).” Finally, Elon Musk in a statement attributed its drop in sales for Q4 2015 to, “one-time manufacturing inefficiencies, a strong dollar and lower than expected deliveries.” If these issues are not dealt with, we can expect to see more losses from Tesla because as Michael pointed out, it is not sustainable for Tesla to rely on Cap and Trade profits.
Source: http://www.wsj.com/articles/the-tesla-paradox-1423786534
Tesla provides a new source of competition for the preexisting car manufacturers. Their potential to make a dent in the environmentally conscious market has led other manufacturers, like GM, to develop better technology. As a new manufacturer, Tesla does not have the existing infrastructure to operate at a comparable cost to other manufacturers. Tesla releases all patents to the public domain and other manufacturers have made use of these patents making lower emission cars a reality. Although Tesla may not have the business structure to last as long as firms such as Ford, they are playing an integral part in spurring development in lower emission cars and doing their part to combat climate change.
GM had the Volt under development before Tesla existed; in an earlier era they turned out the experimental EV1, which had most of the design – engineering systems used by Tesla, albeit at a time when electronics and batteries were too primitive to be viable. Members of that team do however continue to work on electric vehicles, so GM has kept the knowledge gained.
I’m not convinced however that there’s much evidence consumers are interested, only governments. With generous enough in the way of subsidies….
Since at the earliest it will be the end of CY2017 before the Model 3 is available in limited numbers, Tesla faces at least 7 more quarters with just their two current models. Do they have $2 billion in cash that they can burn in the interim, assuming of course that the Model 3 when launched both sells well and covers costs sufficient to generate positive cash flow?