(Bloomberg) — Tesla Motors Inc.’s Elon Musk is revamping his approach to selling cars in China as the carmaker tries to rebound from a disappointing fourth quarter and meet an ambitious new sales target for 2015.
Analysts had estimated Tesla would post its second-best quarter ever with earnings of 32 cents a share, excluding certain items. Instead, the company reported a loss of 13 cents a share. Revenue missed projections by 10 percent, and Tesla delivered almost 1,000 fewer Model S cars than analysts had estimated.
The company said too many cars were finished at the end of the year and couldn’t be delivered in 2014 because of holidays and weather. With a backlog of orders equal to projected first- quarter production, Tesla bumped up its forecast for deliveries this year by 10 percent to 55,000 — 74 percent more than last year’s total.
“The stock is down because they missed on deliveries, revenue and earnings,” said Theo O’Neill, an analyst with Ascendiant Capital Markets. “But the miss has nothing to do with demand.”
Tesla fell 3.9 percent in extended trading to $204.50 as of 7:59 p.m. in New York.
Musk said last month that sales in China have declined in recent months because consumers have been reluctant to switch to electric vehicles due to perceptions that home charging is difficult and that public chargers are too scarce.
He said lack of demand in China wasn’t the reason for the fourth-quarter miss and won’t limit vehicle sales this year, stressing that Tesla would reach the 55,000-vehicle target even if it sold no cars in China.
China Chargers
“In the long term, we do want to succeed in China and make sure we are doing a good job,” he said. “The biggest issue that we are fighting to address is the perception that it’s difficult to charge in China.”
To that end, Tesla said it will install chargers at buyers’ homes before the vehicle is delivered, which Musk said rivals already do in China. The automaker is also adding features such as a second-row center console for owners who are driven.
Tesla didn’t report how many deliveries it made to customers in China.
“They got off on the wrong foot in China, and it’s going to take more time to figure it out,” O’Neill said.
Fourth-quarter deliveries reached a record 9,834 vehicles, 12 percent less than Tesla needed to reach its full-year target of 33,000. Full-year sales totaled 31,655 cars. Thanks to a “herculean effort,” the company was able to reach its 2015 production goal of 35,000 cars, even after delaying release of its all-wheel drive model “to ensure it would be a truly great experience for owners,” Musk and Chief Financial Officer Deepak Ahuja said in a letter to shareholders.
Model X
The Palo Alto, California-based company said it has received almost 20,000 Model X reservations and entered the year with a backlog of 10,000 Model S orders.
Demand was spurred by the addition of all-wheel-drive versions of the car and capabilities such as adaptive cruise control and automatic high-beam dimming. New features will be added in the first and second quarters, Tesla said.
The company said it will be able to assemble 2,000 vehicles a week by the end of 2015.
Despite missing estimates on deliveries, revenue and profit, which have been anticipated since Musk’s comments about China in January, the report was positive, said Ben Kallo, a San Francisco-based analyst at Robert W. Baird & Co.
“The guidance of 55,000 deliveries this year is in line, and they’re still on track for Model X timing,” he said.
At the rate it’s growing, if all goes right, Tesla could be worth as much as Apple Inc. in about a decade, Musk said.
With 2015 revenue of about $6 billion and growing at 50 percent a year for 10 years with a 10 percent profit margin and a price-to-earnings ratio of 20, the future Tesla could be worth about $700 billion, Musk said.
“Our market cap would be basically the same as Apple’s is today,” Musk said.
