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Tesla Motors’ New Direction

Tesla Motors’ New Direction

The thesis on Tesla Motors changed again. Now, the question for investors isn’t whether the electric-car manufacturer can be profitable; it’s just how profitable it can be. Tesla, led by CEO Elon Musk, earned 5 cents a share during its second quarter, generating $405 million in sales.

The Model S continues to blow past the wildest expectations of industry observers as global deliveries surged in the three-month period to 5,150 units for the quarter. In contrast, analysts were expecting a loss of 17 cents a share on $383.4 million in revenue for the second quarter. Not only is the company now profitable (albeit on a non-GAAP basis), gross margins continued to tick up. For the quarter, gross margins were 22% (13% when you exclude Zero Emissions Vehicles credits). The company has stated that its goal is 25% and Musk emphasized that he’s confident about getting there.

“Obviously, on average between Q3 and Q4, we need to do six points per quarter, so we need to make as big an improvement as we did Q1 and Q2. It’s a significant hill to climb and a huge amount of work, but we feel pretty confident about the 25% number,” Musk said. “And, it’s important to note that we have visibility into these numbers more than ahead of time.”

Not only is Tesla profitable for the second time in its history, but as the Model S continues to be supply-constrained, Tesla is taking market share from all manufacturers, not just premium sedans. Both Musk and CFO Deepak Ahuja noted Tesla’s customers are coming from Toyota Motors’ Prius, the Mercedes E-Class, the Toyota Highlander, Volkswagen Jetta, Honda Motors’ Civic and Odyssey, and the BMW5 Series, to name a few.

This article by Chris Ciaccia was originally published on theStreet.com.

Copyright (C) 2013 LexisNexis, a division of Reed Elsevier Inc. All Rights Reserved.

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