Tesla 3Q Financial Results Disappoints Investors, Stock Fell 12 Percent

The investors of Tesla Motors Inc (NASDAQ:TSLA) seemed disappointed by its financial results for the third quarter as the stock plummeted more than 12% after hours on Tuesday.

The electric car manufacturer reported that it $38 million GAAP net loss or $0.32 losses per share on $432 million revenue.  Tesla Motors said its non-GAAP net income was $16 million or $0.12 earnings per share on $693 million revenue.

The company is reporting its non-GAAP financial results excluding the effect of lease accounting because it believes that it is in line with its underlying cash flow activity and the timing of its deliveries.

According to Tesla Motors, its non-GAAP gross margin for the quarter was 22% while its GAAP gross margin was 24%.  Its expenses for Research and Development (R&D) were $48 million non-GAAP or $56 million on GAAP basis.  The company explained that it R&D expenses was higher as the company works on right-hand drive for Model S and its localization efforts on foreign markets.

Its selling, general, & administrative (SG&A) expenses rose to $67 million (non-GAAP) or $77 million (GAAP) from the previous quarter as it expands its business operations globally and invests further in retail and super charger networks.

Tesla Motors ended the quarter with a positive free cash flow of $26 million and its total available cash was $796 million.

During the third quarter, Tesla Motors delivered 5,500 Model S vehicles. The electric car manufacturer said that there are already 19,000 Model S owners in 20 countries.  In his letter to shareholders, the company’s chairman and CEO Elon Mush wrote, “As more people see our car on the road, take a test drive or talk with another Model S owner, more demand is created for our product. Demand exceeds supply, despite no advertising, no discounts and no paid endorsements.”

Tesla Motors is current producing 550 cars per week, and it production exceeded the deliveries during the third quarter to fill-up is pipeline of vehicles to be delivered in Europe and to provide cars for service and marketing uses. The company intends to continue to increase its production over the next quarters.

The electric car manufacturer emphasized that the demand for its Model S vehicle is growing steadily in Europe and North America. The company is also expected to deliver the first orders for Model S in China during the first quarter of 2014.

Tesla Motors is committed in expanding its Supercharger network because it is critical in its value proposition. One of the primary reasons that attract consumers to buy an electric car is the availability of charging stations. At present, there are 31 stations in North America. The company is expecting to complete its supercharging network that would allow cross-country driving in the United States for owners of Tesla cars by the end of 2013.  It is also expanding its supercharging network in Europe and Scandinavia.

For the fourth quarter, Tesla Motors projected that it would be able to deliver 6,000 Model S vehicles. Its non-GAAP gross margin is expected to be about 25%. The company estimated that its total deliveries for the entire 2013 will be around 21,500 vehicles worldwide.