Tesla reaches break-even point as it struggles to catch up with orders

Tesla’s on a roll these days. Still basking in the glory of rave reviews by Motor Trend and Consumer Reports, CEO Elon Musk announced that the company has stopped burning cash and reached the break-even point, a major milestone for any start-up. “Am happy to report that Tesla was narrowly cash flow positive last week. Continued improvement expected through year end,” Musk tweeted.

In November, Tesla told the Securities and Exchange Commission that it was producing 200 cars per week, “which is at the critical threshold needed for Tesla to generate positive operating cash flow,” and expected to increase that to 400 cars per week in December.

Increase production it must, in order to get out of the weeds and clear a backlog of advance orders that’s estimated at over 5,000. Having more orders than one can handle is a bigger problem than it sounds like, at least in this business. Luxury car buyers don’t like having to wait months for their vehicles, and the management textbooks are full of stories about bygone companies that failed to deliver their much-anticipated products in time.

Tesla is working its way through its order book starting with the most expensive models. It is currently producing top-of-the-line sedans with the 85 kWh battery pack. Spokesperson George Blankenship offered the following timetable:

  • 60 kWh cars will begin production in January 2013. Deliveries will begin in January-early February.
  • 40 kWh cars will begin production in March 2013. Deliveries will begin in March-early April.

Said Blankenship, “Our original plan was to deliver 5,000 Model S in 2012. In our November letter to shareholders, we reduced our 2012 plan to between 2,500 and 3,000 while re-affirming 20,000 deliveries in 2013. This basically ‘shifted’ our production ramp back about two months for all options not available at the start of production. We will continue to provide regular updates regarding these options as each gets closer to phasing into production.”

 

Sources: Wall Street Journal, Tesla