Despite declines for the quarter, Tesla is bullish on its overall energy business

Even as its solar business declined in step with its overall earnings, Tesla is bullish on the prospects for the energy side of its business over the course of the year.

The energy business is an unheralded part of Tesla — overshadowed by its headline grabbing (and much larger) auto exploits — that chief executive Elon Musk thinks will generate an increasing share of revenue for the company over time.

Revenues from its solar power and energy storage business fell by 13% from the fourth quarter 2018 and 21% from a year ago period down to $324.7 million from $371.5 million in the fourth quarter of 2018 and $410 million in the year ago quarter.

Solar energy deployments fell from 73 megawatts to 47 megawatts from the fourth to the first quarter, the company said. Those figures were offset by a slight increase in solar deployments.

The company actually introduced a new financing and purchasing model for solar installations in the second quarter — saying in its shareholder letter that residential solar customers can buy directly from the Tesla website, in standardized capacity increments.

“We aim to put customers in a position of cash generation after deployment with only a $99 deposit upfront. That way, there should be no reason for anyone not to have solar generation on their roof,” Musk and chief financial officer Zachary Kirkhorn wrote in the shareholder letter.

Tesla’s battery storage business was hit as the company shifted units from energy storage to installation in its own vehicles.

“Energy storage production in the second half of 2018 was limited by cell production as we routed all available Gigafactory 1 cell capacity to supply Model 3,” the company wrote in its letter. “Some Gigafactory 1 cell production has been routed back to the energy storage business, enabling us to increase production in Q1 by roughly 30% compared to the previous quarter.”

And Musk thinks that the energy business will grow significantly over the course of the year. “We hope that growth rate will continue and battery storage will become a bigger and bigger percentage over time,” Musk said on an analyst call following the earnings release. Potentially, Tesla thinks its energy business could grow by as much as 300%, Musk said. 

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Tesla reports $702 million loss in first quarter

Tesla reported Wednesday wider-than-expected loss of $702 million, or $4.10 a share, in the first quarter after disappointing delivery numbers and other setbacks and costs threw the automaker off of its profitability track.

The loss included $188 million of non-recurring charges. When adjusted for one-time losses, Tesla lost $494 million, or $2.90 a share, compared with a loss of $3.35 a share a year ago. Tesla reported that it also incurred $67 million due to a combination of restructuring and other non-recurring charges.

While analysts had anticipated a loss — an adjusted loss of $1.15 a share on sales of $5.4 billion for the quarter, according to Factset — actual losses stretched far beyond those expectations.

Tesla and CEO Elon Musk warned earlier this month that it expected first-quarter profits to be negatively impacted by lower than expected delivery volumes and several pricing adjustments. This was the first earnings report since losing a federal tax credit (more specifically half of it) for its buyers on Jan. 1.

Tesla reported April 9 that it delivered 63,000 electric vehicles in the first quarter of the year, nearly a one-third drop from the previous quarter. Deliveries included about 50,900 Model 3 vehicles and 12,100 Model S and X SUVs.

Musk reiterated the delivery problems due to unforeseen challenges in the earnings call Wednesday, noting that a large number of vehicle deliveries has shifted to the second quarter.

The results reported Wednesday follow two consecutive quarters of profitability that were fueled by sales of the Model 3. Tesla reported a $139 million profit in the fourth quarter and in October posted its first profit after seven consecutive quarters of losses.

Tesla reported that its cash position decreased by $1.5 billion from the end of 2018 to $2.2 billion mainly due to the repayment of convertible notes, of which $188 million negatively impacted operating cash flow. Tesla paid off its $920 million convertible bond obligation in cash in March.

Here are a few of the highlights:

  • Tesla’s Q4 revenues were $4.5 billion, compared to $7.2 billion in the fourth quarter
  • Tesla’s Q4 operating cash flow less capital expenditures dropped to a loss to $920 million, compared to a positive $910 million in the fourth quarter

Tesla first-quarter earnings follows a series of announcements by the company, including changes to the drivetrain design on the Model S and X that will increase the range of the vehicles about about 10 percent. The newly equipped Model S will now have an EPA estimated range of 370 miles, while the Model X long range variant will be able to travel 325 miles on a single charge. The cars have the same 100 kwH battery packs.

Tesla also held an event centered on its efforts to develop autonomous vehicle technology and included insight and news around its custom-built computer chip, Musk’s plans to launch a robotaxi business in 2020 and a demo ride.

Tesla reports first-quarter losses, more to come

Tesla Inc on Wednesday reported a $700 million loss for the first quarter and said it would also lose money in the second as it struggled to deliver cars to customers and launched a cheaper version of its Model 3 sedan.