Tesla’s revenue forecast cut for 2012, following a slow start to the Model S Sedan launch, is a “fairly serious setback”, industry website insideeevs.com said as the company announced it had cut its revenue forecast for 2012 because of a slow rollout of the new Model S sedan.
The report said production updates for this quarter had come often from the company but the numbers did not match up to Tesla’s own lower guidance of 500 Model S deliveries by quarter’s end, (down from 1,000 earlier) and 5,000 total units by year’s end.
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Tesla said, in an 8-K regulatory filing with the Securities Exchange Commission (SEC), it expects 2012 revenue in the range of $400m to $440m, down from its prior outlook of $560m to $600m.
The company is expected to deliver only about 225 Model S cars this quarter, which would suggest Tesla expects to now sell only 3,000 Model S cars by year’s end.
“We commenced production of our Model S in June 2012. We continue to ramp [up] production at the [factory] with the goal of producing the world’s finest automobile. The Model S is an all new vehicle which we are producing with new employees using new equipment. As our main focus is on quality, we have methodically increased our Model S production at a rate slower than we had earlier anticipated,” Tesla’s 8-K statement on Model S production said.
Tesla reportedly put the bulk of the blame on supplier and quality control issues.
Output of 5,000 Model S vehicles per quarter is seen as the level at which the company achieves enough margins to be profitable, insideeevs.com said.
It noted that Tesla might not be able to ramp up to this level until almost through its pre-order reservation list of over 13,000 potential buyers; meaning, insideeevs.com said, it then has to prove its viability from ongoing demand “which at 5,000/month… seems like a hard bridge to cross”.
Tesla saidreservations had increased by 1,500 since June but added cancellations rose in the third quarter as the company asked the first several thousand reservists to firm up and configure their car for delivery.
Founder and CEO Elon Musk has said Tesla might consider raising equity at some point “to provide a cushion” and help fund vehicle development but the automaker won’t do so in the very immediate future.
Tesla also needs to raise additional capital without which it may violate its loan agreement with the US energy department.
“We currently anticipate that without raising capital in addition to [a planned share] offering, we would need to seek an amendment from the DOE to modify the total liabilities to stockholder equity covenant for the quarter ending 31 March, 2014,″ it said.
Tesla spokeswoman Jess Evanson told insideeevs.com the company “expects to be close to free cash flow break-even at the end of 2012’s fourth quarter.”
“Not exactly a ringing endorsement for the future,” the website commented.
