Tesla loses money and may lose the market to GM

Tesla Motors ended 2014 with unexpected losses, but don’t worry if you are an investor; Elon Musk has given his assurance that the Electric Car Company heralding from California is on track for record sales in 2015 as new models hit the market.

The financial performance of Tesla Motors has its share of detractors, with claims that the only way that it makes money is via the sale of carbon credits, mainly to Honda; in 2014, Tesla earned US$216 million from selling credits, which is the equivalent of about 7% of the company’s EV sales. There are also allegations that its financial treatment for the revenue from leased cars does not follow the industry standards.

The company built a total of 35,000 Model S cars in 2014, which sell for US$71,000 in the US of A and even more in world markets such as China, where Tesla was targeting high growth for the year. In fact, Tesla managed to shift just 120 cars in China for the year, citing problems with exchange rates as a key barrier to success in the region.

Even though the high US Dollar has made the already high-priced car more expensive in key markets, Musk has publically said that he will be holding his managers responsible where sales are lagging.

"We have no choice in this regard. There is no way that we can afford to subsidize a region of any size in the long term without causing serious harm to the company," Musk said in an email to employees that has gone public. The same email indicated that job losses may result from the lack of performance.

And in an earnings conference with analysts, Musk said he is reluctant to raise prices of the Model S. "It's not a cheap car. For the vast majority of our customers it's the most expensive car they've ever bought," he said. 

For the full year, Tesla lost US$294 million; revenue jumped 60% to US$3.19 billion. Tesla, which was founded in 2003, has never posted a full-year profit. Currently Tesla Motors only makes the one car, the Model S, but there are plans to launch the Model X SUV this year sometime in the Autumn; later next year, the US$35,000 Model 3 should go into production. However, by then it is unlikely that Tesla will have the segment all to itself as GM will have its very own all-electric vehicle in the same budget sector as the Model 3.

The GM version will be based on the outgoing Bolt that it showed at last year’s car shows. The vehicle is set to be manufactured in the home of mass car production, Detroit, and has a 200-mile range from a single charge and a price tag of US$37,500. 

Tesla’s models should boost sales, and the company is ambitious to increase sales from the current 50,000 to 500,000 by 2020. High perceived cost and range anxiety, though, are still holding back the sales of EV’s, so the expansion of the charging network is also a key focus for Musk who is pushing for more charging stations in both the US and China. Tesla now has 900 charging stations in North America and Asia, with 380 having “Superchargers” which power the car more rapidly.