Tesla Motors Chief Executive Elon Musk says the company is already overrun with orders for its new line of zero-carbon batteries for homes, businesses and utilities.
“There’s no way that we can possibly satisfy the demand this year,” Musk told Wall Street analysts during a conference call to review first-quarter earnings. “We’re basically sold out through the middle of next year — in a week! We can’t even respond to them. We have to triage our response to those who want to be a distributor. It’s crazy off the hook. It seems to have gone super viral.”
Which raised an interesting question from Barclay’s auto industry analyst Brian Johnson: Might Tesla decide to pivot away from the auto industry to focus more on energy storage? It’s not unusual, he noted, for early stage companies to change their focus, pointing to Musk’s previous company, PayPal , as an example.
“It’s possible,” replied Musk. “All we know right now is we have demand well in excess of our production ramp.”
Given the complexity and heavy capital investment for automobiles, might stationary power deliver a better return, Johnson asked?
“It might,” replied Musk. “A year from now we’ll have a much better idea. That’s super-speculative.”
Long-term, Musk said, “I think we’ll see demand for stationary storage to be approximately double that of the car.”
Tesla’s first quarter results showed some of the strain of trying to pursue both paths at once. Although its GAAP revenue leaped to $940 million on sales of 10,045 Model S cars, Tesla burned through nearly $400 million in cash during the quarter. That’s due to heavy capital spending to prepare for the launch of its long-delayed Model X SUV later this year, including a new paint shop at its factory in Fremont, Calif., as well as the $5 billion battery gigafactory now under construction in Reno, Nev. Its gross margin, at 27.7percent, was on target as production efficiencies offset the negative effect of a strong dollar and higher warranty reserves. But Tesla has yet to turn a profit, recording a net loss of $154 million.
But while Tesla races to meet demand for Powerwall, it also has to launch the Model X, which is missing out on the current boom in SUV sales. Musk said he’s aiming for a “late Q3 launch” of the SUV, but acknowledged that the X’s unique gull-wing doors and rear seats have required extra attention. “It would be easy for us to do some initial deliveries in August…,” Musk said, ” but we don’t want to have buckling door issues with the X.” Instead, Tesla plans to create “ a captive fleet” of several hundred vehicles this summer so it “can iron out the issues and make sure those vehicles work very well.” He added that Tesla should be able to ramp up to 1,000 vehicles a week more quickly than it did when it started production of the Model S.
Getting the Model X to market is only half the battle, however, said Kelley Blue Book analyst Karl Brauer. “Interest will be huge initially, reflecting the current market’s hunger for all things SUV, but if something derails the Model X’s rollout and keeps Tesla from taking full advantage of the hype and pent-up demand it will be a missed opportunity to generate substantial revenue in a short period.”
Even so, Model X will be a relatively small player, with production capacity in the 10,000 to 20,000 range for 2015 and perhaps twice that next year, added Brauer. By comparison, Lexus sold 107,000 RX crossovers in 2014, and Acura sold 65,000 MDXs.
Tesla’s high volume car will be the $35,000 Model 3, which Musk said will be shown in March 2016, and start production in late 2017.