The electric-car maker said this week it plans to spend $1.5 billion in 2015 to expand production capacity, launch the Model X crossover and continue work on its Gigafactory, which is being built outside of Reno, NV.
The company is also investing in its stores, service centers and charging network, which is expected to grow by more than 50 percent this year. Plus, it's still working on the Model 3, which is scheduled to arrive in 2017.
"We're going to spend staggering amounts of money on [capital expenditures]," Tesla chairman and CEO Elon Musk said on an investor call.
He then added: "For a good reason. And with a great ROI [return on investment]."
They're bold plans, and Musk is clearly willing to put Tesla's money where his mouth is.
That's why the company is projecting a whopping 70-percent increase in deliveries this year, for a total of 55,000 cars. A large chunk of that growth will come from the addition of the Model X crossover to Tesla's portfolio, and the company already has nearly 20,000 reservations for it. More than 30 Model X prototypes have been built, and it is expected to begin shipping to customers this summer. Musk said he's "highly confident" the vehicle, which has experienced delays, will arrive on time. The company also had more than 10,000 orders for the Model S at the start of the year.
The big spending plans caused a stir, even though Tesla spent $369 million on capital expenditures in the fourth quarter alone.
In a note to investors, Morgan Stanley analysts called the costs required to keep pace with Tesla's demand "eye-wateringly high," and said the $1.5-billion figure was nearly double their expectations.
Still, Musk is not thinking small and suggested that his company could be as big in 10 years as Apple is now if Tesla's growth continues. His optimism comes as the company actually reported a $294-million net loss in 2014, more than its $74-million loss in 2013.
The money, however, continues to roll in, and total revenues increased to $3.2 billion in 2014, up from $2 billion in 2013 and a dramatic surge from $413 million in 2012.
More of the same is expected this year, and the company could reach $6 billion in revenue. As Morgan Stanley noted, it "seems Tesla is preparing to be a much larger company than we have forecasted."
It's certainly spending that way.
Other News and Notes
Nissan 370 Nismo Roadster concept brightens Chicago Auto ShowThe Chicago Auto Show is often all about trucks, and this year, it's mostly about truck trim levels and refreshes, it seems. But the Nissan 370Z Nismo Roadster concept cut through some of that clutter with a performance vibe. Nissan increased the engine output to 350 horsepower, the same as the 370Z Nismo hardtop. It also features design and chassis enhancements that create a sportier appearance and drive character than the regular 370Z convertible.
We don't expect it to remain a concept for long, either, as the car in Chicago appears to be production ready. "The idea of adding NISMO levels of look, feel and performance to a Nissan 370Z Roadster is one that we've been considering for a long time," Pierre Loing, Nissan vice president of product planning, said in a statement.
Activist investors eye GMA group of four investment funds led by former Obama advisor Harry J. Wilson wants General Motors to buy back $8 billion worth of its common stock. Additionally, Wilson has nominated himself to a position on the GM board of directors. In a letter to the automaker, he said he wants to bring these proposals to GM's annual meeting, which hasn't been scheduled yet.
Wilson and his group say GM's stock is "undervalued" and the company is "overcapitalized." The news came in the wake of GM's $2.8-billion profit announced earlier this month. Wilson was a US Treasury advisor during the GM and Chrysler bankruptcies in 2009. He's spent most of his career working for investment funds.
Senators propose anti-hacking laws for carsDemocratic Sens. Ed Markey (Massachusetts) and Richard Blumenthal (Connecticut) announced legislation Wednesday that would set federal standards for automakers to secure cars against hacking and protect motorists' privacy. The bill would direct the National Highway Traffic Safety Administration and the Federal Trade Commission to come up with the rules.
"We need the electronic equivalent of seat belts and airbags to keep drivers and their information safe in the 21st century," Markey said in a statement. "There are currently no rules of the road for how to protect driver and passenger data, and most customers don't even know that their information is being collected and sent to third parties."
Markey released a report on Monday that claimed vehicles are vulnerable to cyber attacks and automakers are not doing enough to protect their products.
Markey and Blumenthal argue that in-car connectivity features have advanced faster than security measures. The potential vulnerability was evidenced by a 60 Minutes report this week that showed researchers remotely accessing a Chevrolet Impala. The German Automobile Association also has hacked into a BMW, which prompted the company to issue an over-the-air software fix.
Featured GalleryTesla Model S
I guess I will be the dissenter from the gang. I do have TSLA stock and have sold off enough to make a profit and return on my initial investment (my policy). I continue to hold some because I see a company with a vision. Ok, their recent filing was not as expected. And the price of gas is lowering which may hurt their business model depending on how long it lasts.
But...
1. How many businesses have transformational capability AND a sound business plan that are executing? They ARE more like Apple and Google than GM or Ford. They just need a little more time.
2. They have 30,000 car reservations and 2/3 of that are for a car that hasn't even been sold or seen yet.
3. No marketing!
4. American made.
5. A diversified plan. Solar City and the home battery plan will soon become a huge part of the overall combined business strategy. I would not be surprised at all to see them roll out a combined car, solar, home battery lease plan in the next 5 years that will help them create a "pseudo-ownership" in the home and transportation capability of the American consumer. Imagine Tesla and Solar City selling you the ability to have a car with 400 mile range (coming soon), high performance, low home energy costs, no utility usage, for a "low" monthly lease fee?
6. The next generation of American consumers care more about the environment than cost. They will pay more to have a well executed product that is "friendly". This will help keep Tesla margins high. As long as they concentrate on quality, they will continue to have a solid customer base.
7. People do not like car dealers. At some point, Tesla will win out the ability to sell direct to consumers and then people will just buy their car online and have it delivered to their house.
I think part of the reason to support Tesla, and why I am still invested, is because I WANT THEM TO SUCCEED. I want to get away from the current model. I think we need something better. I think continued financial support of a company you believe in is part of being an investor. Does the current valuation make sense? No. But as an investor, I am betting on the future.
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