Tesla Motors (NAS: TSLA) is set to report fourth-quarter and 2011 earnings after the market closes Wednesday. Are any surprises likely?
Probably not. Analysts are expecting somewhat wider losses (around $0.63 a share), according to Bloomberg, but that's no surprise. With production of the Roadster ended, and production of the Model S not yet started, Tesla's revenue is likely to be thin for a couple of quarters. More importantly, as Tesla gears up for what may be the most important summer in its history, all signs so far have indicated that the company is on track.
But for investors, watching those signs carefully will be critical.
Managing expectations carefully
Tesla drew some scrutiny recently after Fisker Automotive, a start-up builder of luxury hybrid cars that some have seen as a Tesla rival, fell on hard times after the Energy Department cut off the company's access to a line of credit.
The Energy Department's move came after Fisker missed a series of deadlines in its plan to build a plug-in hybrid at a former General Motors (NYS: GM) plant in Delaware. Tesla also has a government loan -- $465 million worth -- that it is using to put its all-important Model S sedan into production, something that is scheduled to happen by summer.
So is Tesla's line of credit at risk? Not at all, CEO Elon Musk told The Wall Street Journal: Tesla's plan to put the Model S into production and deliver the first customer vehicles in July is on schedule.
Musk's remarks reiterated his statement in January that he was "highly confident" that the Model S would roll out on schedule. Tesla expects to draw down the remaining balance of that loan over the next few months, Musk told the Journal, as it completes work on the Model S's assembly line in the California factory it acquired from Toyota last year.
It's a safe bet that Musk will reiterate all of that Wednesday, and will confirm once again that the Model S is on track. So what else should shareholders keep an eye on?
Points to ponder as the week unfolds
First and foremost, beyond the obvious data points (like Tesla's cash balance and the state of the Model S rollout) I'll be looking for more information on the company's plans for the Model X, its next new model. The Model X, which Tesla unveiled last week, is a midsized SUV that is expected to launch late in 2013. It's a good-looking vehicle, a swoopy design with lift-up side doors and lots of room for cargo. It will be built on the Model S's platform, but is expected to have slightly less range, a function of its somewhat higher curb weight.
I'll also be listening for any insight into Tesla's plans for marketing the Model S. The company has more than 8,000 preorders for the sedan, enough to account for the first several months of production; if you ordered one today, you could expect delivery in March of next year, Musk said recently. But the big question for Tesla for a while has been, "What then?" Once the early adopters have their cars, how does the company plan to "cross the chasm" and sell to more mainstream buyers?
That has been an open question -- at least from the public's perspective -- for some time. But I was encouraged by remarks Musk made to the Journal, when he said that the Model S isn't really competing with electric cars or hybrids from GM or Ford (NYS: F) . Rather, he said, "Buyers for a Model S are buyers who would have otherwise bought an Audi A6... a Mercedes E class... or a BMW 5 and 7 series."
That's exactly right. Those buyers -- the people who are today driving one of those cars, or perhaps a Lexus or Cadillac -- are the folks that Tesla will have to reach with a convincing value proposition in order to expand sales beyond its core audience. That value proposition will depend on everything from the ease of recharging the all-electric sedan to the quality of its interior fit and finish (an absolutely critical differentiator in this market segment).
What's Tesla's plan for reaching those buyers? We may not find out this quarter, but it's the key to the company's success. Keep a close eye on reports later this week to learn more.
Tesla continues to be an intriguing investment story, but the Fool's analysts have selected a different company that they believe is poised for tremendous growth in the coming year. You can learn more about this great stock in their new special report: "The Motley Fool's Top Stock for 2012." It's completely free for Fool readers.
At the time this article was published Fool contributor John Rosevear owns shares of Ford and General Motors. You can follow his auto-related musings on Twitter, where he goes by @jrosevear. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of Tesla Motors, Ford, and General Motors. Motley Fool newsletter services have recommended creating a synthetic long position in Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.