Richard Moyer writes: These days, I await Tesla Motor’s quarterly reports with grim anticipation. I am always guaranteed some unexpected bit of creative accounting, employed to paint a brighter picture than reality would normally provide.

Q4 was no different, offering a rosy picture of 2750 vehicles rolling off the production line, with a Q1 2013 profit just around the corner. The revenue from automobile sales and cost of revenue were balanced, showing a sliver of a profit before R&D and administrative costs.

Proof of concept? I’m no so sure.

From 2750 cars, which were primarily Type S sedans, they claim $294,377,000 in income. That’s about $110,000 per car, while the MSRP of the sedan is between $50k-$90k. Assuming the average person paid $75k for a Type S, that’s still only $206 million in revenue. I’m not sure how this worked out, but I’ll have to believe it for now.

Their income statement didn’t look so bad until I saw the balance sheet.

Accounts payable is up $153 million in one quarter, now sitting at $343 million compared to $306 million in revenues. Their $306 million in revenue required they incur $430 million in expenses, so I would hardly call that a profit.

Furthermore, they have $452 million in long term debt, but were somehow able to pay only $85,000 in interest that quarter. That works out to a 0.07 percent annual interest rate. What is going on here?

Between questionable income and questionable expenses, what is credible? As I’ve maintained since first examining their financial statements, Tesla Motors is headed for a heap of trouble.

Independent of creative accounting, DOE loan vehicles and loads of free PR are the naked costs of building these electric cars. If Tesla incurred roughly $530 million dollars in expenses (including those accounts payable) while building 2750 cars, they should retail for an absolute minimum of $200,000 apiece. This is a far cry from their MSRP of $50-$90k. A 25% increase in efficiency, and a small reduction here and there in R&D is not going to close this gap, contrary to the sunny projections of their Q4 report. Cost cutting will have to be dramatic and draconian should they ever hope to turn a profit.

Richard Moyer

http://shadesofthomaspaine.wordpress.com

© 2013 Copyright Richard Moyer - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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