Tesla Q3 numbers

On the third of November we received third quarter earnings from electric car maker Tesla. I am sure the company needs no introduction. If you have not heard of Tesla or Elon Musk you are probably living in North Korea. Over there the fat man is just about to invent cars with a sixth gear. Here in the real world, Tesla is changing the face of automobile manufacture. Lets delve into the numbers first.

Revenues came in slightly below expectations at $1.24bn. This equated to a loss of 58c per share. It's hard to value this business because it is in huge growth mode. The biggest issue for the business in fact is being able to produce enough vehicles to meet the demand. To put things into perspective, Ford has a market cap of $58bn with revenues of $35.8bn in their 3rd quarter. Tesla has a market cap of $30bn with 29 times less revenue than Ford.

The share price improved by 10% on the day of the release. That is because guidance for next quarter is to deliver between 17000-19000 vehicles. In this quarter now they delivered 13091 vehicles. Elon Musk is famous for over promising, this is how he motivates his employees to work harder than ever.

It was a big quarter for Tesla. They launched the Model X which is the first ever SUV electric vehicle. It looks incredible, check it out here from their website. MODEL X. It is beautiful, just like everything else Tesla produce. And I am not even a car person. There were delays, however. Elon Musk is a perfectionist and is not concerned with fickle short term shareholders who only care about car deliveries. He wants to deliver a near perfect product. This is their second car, the first being the Model S.

I have just come back from Europe and was fortunate enough to see a few Tesla's. I even got to sit in one at a Tesla store. I see so many similarities to Apple. One of the most powerful ones is that Tesla clients become the company's best salesmen. I met up with a family friend who lives in the US and owns a Tesla. He couldn't stop raving about the car. He explained how the software updates (Tesla describe these as updates released over the air) almost give you a new car. Without your car leaving the garage defects can be fixed, autopilot updated and even the battery life can be enhanced due to more efficient operations.

There is no combustion engine so need for services. It is simple which means less chance of anything breaking. And it is an experience, apparently the performance is incredible with unmatchable safety features. The car industry has been pretty stagnant for over half a century and finally we are witnessing a revolution. They are also at the forefront of self driving vehicles. They have the luxury of all the data coming through from existing Tesla drivers to improve the technology. Even now the car basically drives itself.

Of course there are still challenges. Competition is heating up. But if you believe, like I do, that electric cars will one day over take combustion engines, then the industry actually needs more competition. There will be no lack of demand for decades to come. Tesla have a much cheaper model in the pipeline to target the mass market.

What about recharging? Tesla install a new recharge booth every 24 hours. In California you are never more than 42 miles away from a Supercharger. In Germany you are never more than 33 miles away from one. At the moment a vehicle can drive up to 300 miles (480km) without needing to charge. That is only going to improve. Tesla are pumping millions of dollars into battery technology. See the image below.



Where does the power come from? The sun of course. The Powerwall made huge waves when that was released a few months back. Being able to harness power from the sun and store it in batteries in order to power homes and cars is their main objective.

As you can see from the comparison with Ford, expectations are high. This is going to be a wild ride as Elon and his team focus on making the world a better place with the most amazing products as apposed to pleasing analysts with 1 year price targets. Our Investment strategy is about picking stocks which we feel will outpace market expectations. I believe the adoption of electric cars is underestimated. Do not underestimate the strength of scale too. Tesla's production will accelerate. Having read Elon Musks book, his ability to cut costs and produce quality products all in house at SpaceX is inspiring. In fact a lot of the technologies from SpaceX gets pushed onto Tesla, especially the aerodynamic materials which make the cars light and more efficient.

Buy the share, ignore the short term price movements and hold thumbs that Tesla comes to South Africa sooner rather than later. We have electricity issues, import loads of oil but have plenty of sunshine.