Tesla Outsells Other Luxury Automakers
Eileen is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Electric car technology is catching on with consumers. CNN reported that Tesla Motors (NASDAQ: TSLA), known for its pricey electric car, the Model S, sold 4,750 units in the first quarter of 2013. Within the “large luxury car segment,” it sold more units in the first quarter than competitors with similarly priced models, such as Daimler's (NASDAQOTH: DDAIF.PK) Mercedes-Benz S-Class, the BMW (NASDAQOTH: BAMXF) 7-Series, and Volkswagen's (NASDAQOTH: VLKAY) Audi A8.
Tesla’s successful and bumpy road
Tesla was profitable for the first time in the first-quarter of 2013 with sales of $562 million, up 83% from the previous quarter. Its GAAP profit was $11 million. The quarter saw unit production and deliveries rise more than 80% -- 5,000 vehicles were produced in the quarter and 4,900 were recognized as revenue.
Model S buyers receive a $7,500 federal tax credit and Tesla guarantees, “a resale price in three years that is the highest of any premium sedan brand made in volume.” Consumer Reports recently tested the Model S and declared it the best car it has ever tested, giving it a total of 99 points out of a possible 100. Uncertainty on the car’s ability to travel long distances was the only downside noted by the publication and is one that is currently being addressed by the company.
The company expects a gross margin of 25% in the fourth-quarter of 2013 without any ZEV, or zero emission vehicle, credit revenue. Tesla is able to generate revenue by selling its ZEV credits to other automakers, which are required by law to have ZEV credits by either manufacturing zero emission vehicles or purchasing credits. The sales growth for 2013 is estimated at about 300% and over the next five years is around 32%. The average EPS for 2013 is estimated at $0.04 per share and for 2014, it is $1.04 per share.
BMW faces head winds
In comparison, BMW’s 7-series saw a drop in worldwide deliveries by 30% in the first quarter of 2013. Overall, BMW sold more cars in the first quarter than last year by 5%. The company faced several challenges, such as lower consumer spending in the U.S. and the crisis in Europe. Results from China were promising as the first quarter’s largest car market with a growth rate of 22.4%. Since the beginning of 2013, the number of vehicles delivered grew 5.8%, the highest sales figure ever for the first five months of the year.
BMW’s remaining growth rate for 2013 is expected to come out of emerging markets and to be about 3.4%. According to Yahoo! estimates, growth for 2014 and beyond is almost 3%. Full year 2013 EPS is estimated at $7.77 and for 2014, $7.98.
Daimler expects growth in 2013 unit sales
In the first quarter of 2013, Daimler, the maker of Mercedes-Benz vehicles, experienced soft demand coming out of Europe. The company’s EPS for the first quarter was about $0.39 compared to $0.98 in the first quarter of 2012. The company noted it received positive acceptance of new models, such as the A-class and E-class. Over the period of January to May, overall sales grew 5.9% and the brand was strongest in the NAFTA region, Asia, Russia, and Western Europe. The positive trend was attributed to the company’s new compacts and SUVs.
Audi maintains growth in deliveries
Audi’s first-quarter numbers show improving trends in vehicle demand, with China leading the way in the Asia-Pacific region’s 14.9% increase in car deliveries. The company expects global economic growth to continue for the remainder of 2013, but notes uncertainty in its overall direction. Overall expected revenue growth for the company is expected to be “slight” and fiscal 2013 should produce an operating return on sales of 8% to 10%. From January through May, Audi unit sales grew 6.7%, driven by demand in Asia, the U.S., and South America. The introductions of the new A3 and SUVs models were seen as adding strength to the business.
Tesla’s competitors in the luxury car segment are starting to see improvement in vehicle demand. Investors should watch for improvements in the job sector and increasing property values that could push demand higher in the U.S. While Tesla’s shares are pricey and carry a certain level of risk, they could have a good upside potential if the company continues to sell more cars and more consumers embrace electric car technology.
It will be interesting to see if Tesla continues to find ways to make the Model S more affordable or produces other vehicles that would be competitive with the electric car models of its more mainstream competitors. The company’s expanding network of charging stations should increase the brand’s appeal and deal with the question of whether the Model S is suitable for long distance driving. As with all new technology, consumers and investors who buy in will have to go through a period of adjustment.
Tesla's plan to disrupt the global auto business has yielded spectacular results. But giant competitors are already moving to disrupt Tesla. Will the company be able to fend them off? The Motley Fool answers this question and more in our most in-depth Tesla research available. Get instant access by clicking here now.
Eileen Rojas has no position in any stocks mentioned. The Motley Fool recommends Tesla Motors . The Motley Fool owns shares of Tesla Motors . Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!