Tesla posts first profitable quarter

Tesla, maker of the coolest car you rarely see on the road, posted its first profitable quarter sending the stock up and giving hope that electric cars are a viable alternative to gas.

Well, they’re an alternative if you have $70,000 to spend on a luxury car.

Here’s the story from the Wall Street Journal:

Tesla Motors Inc. TSLA +14.74% shares rose as much as 22% on Monday after the luxury electric-car maker said it would report a quarterly profit for its first quarter.

The Palo Alto, Calif., maker of $70,000 vehicles, lifted its forecast for the quarter after delivering more Model S electric vehicles than it previously forecast. Tesla has a backlog of 15,000 orders and books revenue for the vehicles as soon as they are shipped to customers.

The company, which has reported a loss every quarter since it went public in 2010, said its Model S deliveries reached more than 4,750 units in the quarter ended March 30, compared with Tesla’s February outlook for 4,500.

Analysts polled by Thomson Reuters recently had projected a loss of seven cents a share for Tesla’s first quarter.

The disclosure, made late Sunday, came a few days after Chief Executive Officer Elon Musk used Twitter to foreshadow news coming from the Silicon Valley car maker.

“I am incredibly proud of the Tesla team for their outstanding work. There have been many car startups over the past several decades, but profitability is what makes a company real. Tesla is here to stay and keep fighting for the electric car revolution,” Mr. Musk said in a statement.

Apparently, the automaker has no plans to cater to the lower-end, mass market. According to NPR, they’re discontinuing their lower model:

Tesla also said it will discontinue its entry-level option, which was equipped with the smallest battery available, a 40-kilowatt hour version with a much shorter range (about 160 miles). The company said only 4 percent of customers chose the smaller version.

“Customers are voting with their wallet that they want a car that gives them the freedom to travel long distances when needed,” the statement said.

The company will stick with its 60-kilowatt hour option, which offers an estimated range of 230 miles per charge.

Reuters adding this information about the company’s strategy going forward:

The automaker has focused in recent months on building and selling high-end versions of the Model S, with larger battery packs that provide more range.

The top-of-the-line Tesla Model S Performance model costs nearly $96,000. The base Model S, which Tesla is dropping, has a starting price of just over $60,000.

Tesla said only 4 percent of customer orders were for the base Model S, which was to be equipped with a 40 kWh battery pack. Those customers instead will receive a 60 kWh battery pack, with the output and range limited by software to 40 kWh, at no additional cost.

The carmaker went public in 2010 and has narrowed its losses as production of the Model S sedan ramped up late last year.

Bloomberg Businessweek pointed out four things about earnings that should have investors smiling. Writer Kyle Stock was excited about the focus on the high-end market, the company’s pricing power and these:

Good publicity: A controversial review in the New York Times in early February may not have dinged the firm as badly as it seemed. Musk conceded on Bloomberg Television that the write-up (and the subsequent weeklong back-and-forth in the press) wiped out “a few hundred orders.” Unless that dip in demand is manifest in future quarters, it looks like Tesla has moved on.

Research restraint: If profit is indeed in the cards, investors should be as thrilled about cost control as they are about revenue. Specifically, Tesla’s research and development costs seem to finally be falling in line. Last year, for example, the share of total operating expenses going to R&D steadily fell, from 69 percent of costs in the first quarter to 60 percent in the final three months of the year. Tesla’s engineering wizards made a Motor Trend “Car of the Year.” Now the company needs to get some serious mileage out of that stunning and expensive feat before doubling down on future models.

Anytime a company posts its first profit is worthy of noting. The fact that it’s a maker of exclusive, high-end, environmentally friendly cars is enough to warrant even more coverage.