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Tesla sales up 500 percent in Q4, sees profit ahead

Management also says electric car company now turning out vehicles at annualized rate of 20,000 units.

2012 Tesla Model S
Wayne Cunningham/CNET
Tesla lost $89.9 million after charges as sales soared 500 percent sequentially to $306 million in the fourth quarter. At the same time, management delivered a bullish forecast for the company's first quarter.

"In the first quarter of 2013, we expect to generate slightly positive net income, on a non-GAAP basis," CEO Elon Musk said in a letter to shareholders today. He added that Tesla expects "to be near breakeven on cash flow from operations."

Musk wrote in a post co-authored with Chief Financial Officer Deepak Ahuja:

These targets would be achieved through a combination of improved gross margin and lower R&D expenses. The achievement of operational and manufacturing efficiencies will drive some adjustments in our personnel, primarily affecting contractor and temporary employees. At the same time, we are continuing to hire and convert to full time key talent where required.

He also said that Tesla is now "reliably" producing vehicles at an annualized rate of 20,000 units per year.

However, the stock was trading down after hours as Tesla lost 79 cents per share, compared with average expectations ranging from 53 cents to a 57 cents per share loss.

Net reservations at the end of the year were more than 15,000 in the fourth quarter, compared with around 13,000 in the third quarter. At the same time, Tesla said that new reservations were coming in at a slower pace in the first quarter.

But there were a number of bright spots to focus on. For instance, the company's gross profit nearly tripled to $23.8 million in the quarter from a year earlier. Tesla also said that it expects costs to be "substantially lower" in the first quarter than they were during the last quarter of 2012, a trend it predicted would continue throughout the year. As a result, Tesla said that its first-quarter gross profit margins would improve to the midteens percentage range, rising in the second half to 25 percent.

Tesla also indicated that it was making progress weaning itself from government regulatory credits. It said that revenue tied to regulatory credits would fall as more vehicles were sold to more international customers. "While we will pursue opportunities to monetize the credits we earn from the sales of our vehicles, we do not need to rely on such sales to be a significant contributor to gross margin, and our business model is not predicated on such credits," the company said in its statement.

Correction: Due to an editing error, an earlier version of this story incorrectly referred to the number of cancellations in Tesla's third and fourth quarters.