Here's Why Tesla Will Have a Great 2016

2015 proved to be a critical year for electric-car manufacturer Tesla Motors (TSLA). Despite the launch of its value-loaded 70 Kilowatt-hour Model S, the most awaited Model X SUV, autopilot driving facility, and various Tesla Energy products, the company underwent through a small decline in its share price of nearly 2 percent.

The interesting thing about Tesla, however, is that the company’s growth rate is still very high. In 2014 and 2015, Tesla’s vehicle sales growth was 41% and 60%, respectively. While this continuous growth in vehicle sales is untenable over the long period, it looks like that Tesla could manage to accomplish one more year of sales growth speeding up in 2016.

Throughout the last quarter of 2015, the company delivered only 208 units of Model X.
However, according to the quarterly sales report, the company had completely produced 507 units. The remaining units further than the 208 delivered in Q4 were planned to be delivered in first quarter of 2016.

Tesla’s CEO Elon Musk projected that the company will produce positive free cash flow at the end of 2015. But in actual, the company produced $596 negative free cash flow in the last quarter of 2015. The company’s introduction of Model X was not able to certainly contribute to the Tesla’s cash flow statement, mainly due to the several-month delay of Model X from its estimated launching date.

On the other hand, with nearby 30,000 deposit backed orders for Model X on the company’s booking list, and keeping in mind Tesla’s major funds in Model X production, the company should be able to become free cash flow positive during 2016 as it extract profit from superior economies of scale in production.

Apart from this, the company plans to disclose its lower-cost Model 3 in March 2016. But it’s grim to take Tesla’s primary schedule for Model 3 truly, as the company’s Model X was postponed for numerous years before it was available in the market. Irrespective, Tesla should witness strong sales growth in 2016 as the left over vehicles from Q4 will add to this year’s earnings.


The illusion of growth is very important to keep the stock price high. The likes of Amazon and Netflix are trading at premium valuation despite not having any significant earnings due to this illusion. Thus, Tesla’s sales growth this year will likely push the stock higher even if it fails to launch the Model 3.
Published on Jan 18, 2016
By Akshansh Gandhi

Copyrighted 2020. Content published with author's permission.

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