UPDATE: Tesla Now Collapsing 12% After SEC Filing That's Filled With Warnings

tesla model s

Photo: Tesla Motors

Shares of Tesla — the electric car maker — are down 7% 12% after a warning on production and sales.It’s all in this SEC filing.

One other thing before the filing is that Toyota has also dropped plans for a mass-produced all-electric vehicle.

Back to the Tesla filing…

Here’s the part about production:

We commenced production of our Model S in June 2012. We continue to ramp production of Model S at the Tesla Factory with the goal of producing the world’s finest automobile. The Model S is an all new vehicle which we are producing with new employees using new equipment. As our main focus is on quality, we have methodically increased our Model S production at a rate slower than we had earlier anticipated. To produce a vehicle that meets our quality standards requires us to carefully analyse each step of our production ramp, improve the efficiency of our manufacturing processes and continue to train our employees. Our suppliers also must produce new products in sufficient quantities and quality levels to meet our increasing demand. Certain suppliers have experienced delays in meeting our demand and we continue to focus on supplier capabilities and constraints. As of September 23, 2012, we have produced a total of 255 Model S vehicles, including 77 Model S vehicles produced during the week ended September 23, 2012. We anticipate producing over 300 vehicles in the third quarter. We plan to continue our ramp in order to reach our objective of weekly production of 400 Model S vehicles before the end of 2012 which should enable us to produce more than 20,000 Model S vehicles in 2013.

We now anticipate that we will deliver between 200 and 225 Model S vehicles to customers in the third quarter and between 2,500 and 3,000 Model S vehicles in the fourth quarter. As such, we believe we will be approximately four to five weeks behind our previously announced Model S delivery goals as of the end of 2012. As of September 23, 2012, we have delivered 132 Model S vehicles to customers which includes 42 vehicles delivered during the week ended September 23, 2012. The difference between Model S vehicles “delivered” and Model S vehicles “produced” is due in part to the production of 34 vehicles for marketing and engineering purposes, the time it takes us to do final preparation of the vehicles for customer delivery, ship Model S vehicles to various final destinations around the United States and arrange for delivery of such vehicles to customers. We only recognise revenue on delivery of vehicles to customers. As our delivery processes continue to mature, we anticipate that the difference between vehicles produced and vehicles delivered will continue to shrink. This gap will widen again, however, during holiday periods and when we begin to ship vehicles to both Europe and Asia in 2013 due to longer transit times for such vehicles.

To increase the rate of production of Model S, we have taken a number of actions, including working with suppliers to help improve quality and timely delivery of parts, adding automation and second shifts in certain manufacturing areas, increasing training of our manufacturing staff to improve manufacturing processes, and making changes to personnel in our quality control department. We anticipate, however, that manufacturing and supplier issues will continue to arise and need to be addressed in a timely manner.

And here’s the sales warning:

Consistent with our anticipated slower ramp in production and customer deliveries, we now anticipate revenue for 2012 of $400 to $440 million, primarily reflecting a decrease in the number of

Model S vehicles we plan to deliver in 2012. We also believe that third quarter revenue will be in the range of $44 to $46 million, reflecting lower deliveries of Model S as well as the deferral of revenue associated with development services.

In the third quarter of 2012, we anticipate that our gross margin will be negatively affected primarily by the limited number of Model S vehicles we intend to deliver, the consequent allocation of all manufacturing and labour overhead costs across a smaller number of vehicles, manufacturing inefficiencies, higher costs for initial parts, and the delay of development services revenue from Daimler, resulting in a negative gross margin in the range of 15% to 18%. Revenue from Daimler will be recognised when we reach final agreement upon the development milestones and related payments which we anticipate finalising in the fourth quarter of 2012. In the fourth quarter we expect gross margin to improve substantially and turn positive mainly due to higher Model S volume, as well as cost efficiencies and planned cost reductions.

We expect R&D spending for the third quarter to be approximately 20% lower than the second quarter, as this will be the first quarter in which a material amount of our Model S manufacturing expenses will be reflected in cost of goods sold rather than in research and development and as one-time Model S development expenses decline. We also expect selling, general and administrative expenses for the third quarter to increase modestly over the prior quarter as we continue to increase our vehicle selling and servicing capabilities. We believe capital expenditures will be between $220 and $240 million for 2012.

For 2013, we plan to exceed our objective of 20,000 Model S deliveries in 2013 and expect to achieve a gross margin of 25% in 2013 once we achieve manufacturing efficiencies and planned cost reductions associated with higher volume production and improvements in the margins of our powertrain sales.

We have now fully drawn down our $465 million DOE Loan Facility. As of September 30, 2012, and inclusive of the net proceeds of this offering, we expect to have approximately $228 million in principal sources of liquidity from our cash and cash equivalents and current restricted cash. This will include our cash and cash equivalents in the amount of approximately $203 million which will include our investments in money market funds, as well as restricted cash of approximately $25 million which will include cash of $15 million deposited in dedicated DOE accounts in accordance with the requirements of our DOE Loan Facility and which will be used for repayment of all principal and interest that will come due on December 15, 2012. We currently expect to be close to free cash flow breakeven (defined as cash flows from operations less capital expenditures) at the end of the fourth quarter of 2012.

Read the full SEC filling here >

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