12 Feb

Tesla’s 2016 Guidance: Reasons to Be Optimistic

WRITTEN BY Jitendra Parashar

Optimistic about the future

Previously, we looked at some of the challenges and competition that Tesla (TSLA) could face going forward in 2016. However, there are several other reasons that make the company’s future outlook optimistic. In this part, we’ll look at the announcements that Tesla made with its 4Q15 earnings release.

Tesla’s 2016 Guidance: Reasons to Be Optimistic

Upbeat guidance for 2016

In recent years, despite some setbacks on the production front, Tesla has been able to mark its presence in the electric vehicle market. According to data compiled by hybridcars.com, Tesla’s Model S was the best-selling plug-in electric vehicle globally. Model S left behind its competitor Nissan Leaf by a good margin in terms of volume. Now, let’s take a closer look what the company expects to deliver in 2016. Some of the key highlights from Tesla’s 2016 guidance are as follows.

  • Tesla’s Model 3 unveiling date has been confirmed as March 31, 2016. Investors should note that Model 3 is critical for Tesla’s future success. Being Tesla’s first mass-market targeting vehicle, it could allow the company to expand its reach.
  • Tesla expects to generate positive net cash flow and achieve profitability for full-year 2016 on a non-generally accepted accounting principles basis.
  • Tesla also plans to invest in equipment to support cell production at the Gigafactory. In 2016, the company should also start installing machinery for Model 3 production.
  • In 2016, the company plans to open about 80 retail locations and service centers to ensure a wider reach and provide convenience to its customers.
  • Tesla also plans to energize nearly 300 new supercharger locations to make it more convenient for vehicle owners to recharge their vehicles.

Delivery growth

To be able to support its goals, the company plans to aggressively increase its deliveries in 2016. It plans to deliver 80,000–90,000 vehicles in fiscal 2016. This will represent positive growth in deliveries of 58%–78% compared to last year. In 1Q16, Tesla expects to deliver ~16,000 vehicles. This reflects 60% growth from the same quarter last year.

It’s important to note that Tesla is a fairly new company in the auto manufacturing business—unlike mature automakers (XLY) such as General Motors (GM), Ford (F), and Toyota (TM). At this point, the company’s growth should be the key driver for its stock. Therefore, it’s important for investors to follow the progress of Tesla’s deliveries and production.

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