Its profit for the quarter ending March 31 on $562 million in sales from delivery of 4,900 Model S sedans out of over 5,000 built was $11 million.

Tesla also doubled its gross margin in the quarter to 17 percent and it is on track, it says, to 25 percent by year’s end. Moreover it will not include profits from sales of “green credits,” to other car makers.

It did however record $68 million in such credits last quarter, or about $14,000 per car.

Production efficiencies included cutting the time required to build a Model S by 40 percent from December to March while improving inventory management so raw materials declined almost by 26 percent while unit production increased by 80 percent.

Tesla says it is receiving new global orders at a rate greater than 20,000 worldwide, and within the North American market, customers appear to be selling customers on their Model S as sales are regionally clustered.

In all, Tesla projects U.S. demand to exceed 15,000 units per year and global demand above 30,000 per year

As previously reported also, plans are to develop and launch a car costing much less than the Model S, but for now, Tesla is counting on its new financing plan to reduce the barrier to entry of its existing product.

TSLA stock finished up by 0.5 percent on Wednesday at $55.79 per share.

To see a complete copy of the Tesla letter to its stockholders, click here.

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Subpoenas were sent to executives at both companies by the U.S. attorney’s office for the Eastern District of New York requesting emails and documents related to a trading plan, according to the Wall Street Journal.

The Journal reported this is an extension of an existing criminal probe into trading by company insiders led by the U.S. attorney for the Southern District of New York and the Securities and Exchange Commission.

In question by investigators are potential violations to “10b5-1 plans” which are present trading arrangements made allowable in 2000 by the SEC.

Under the plans, executives and non-executive directors who have knowledge of non-public corporate information are permitted to sell some shares, but the plans must be established prior to the executive having insider knowledge.

The prosecutors – which have not alleged any wrongdoing at this juncture – are looking into whether violations to the rules existed, such as insiders shedding their positions when they had privileged information.

A spokesperson for Cardiovascular Systems told the Journal it was complying with investigators in full.

“We have nothing to hide,” he said, adding that an investment fund held by its director that sold shares was “in compliance with the company’s governance procedures.”

A Tesla spokesperson declined to comment, as did representatives for the SEC and New York’s Eastern and Southern districts.

Wall Street Journal (subscription required)

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Should Model S customers need servicing for any issue, the $600 per year package entitles them to have as close to an “invisible” service experience as possible, Tesla says.

The company will valet a premo Model S or Roadster – to customers – regardless what level and options of Model S they may have.

Saying that “the world’s best” cars ought to get “the world’s best service and warranty program,” CEO Elon Musk laid out points regarding the plan.

The company is building a small fleet of 85-kwh Model S Performance loaners and will also make available in most locations Roadster loaners, and other provisions are included.

And, if while they are at it customers decide they like the Model S loaner better, they can just trade their existing Model S in at a pro-rated difference.

“The loaners will be available for immediate purchase at a price that is lower by 1 percent per month of age and $1 per mile,” said Tesla today in a follow-up blog post. “If you like the service loaner more than your other car, you can just keep it. This ensures that the service fleet is constantly refreshed and gives customers the best optionality.”

As time goes on, Musk said Tesla expects cars it takes in on trade will add to a growing inventory of used Teslas for sale as is the case already for pre-owned Roadsters the company offers.

Of course, if customers merely want to get their existing car back, no problem. The idea is not being portrayed as a means to upsell, in fact Musk said something that flies radically in the face of traditional dealership service models.

“What I’ve told the Tesla Service Division is their job is never to make a profit,” Musk said.

Investors may get “mad” hearing this, Musk said, but the service model he says Tesla is aiming for should be run to the “zero profit point.”

Musk contends service is best if it is painless as possible, and he wants to “minimize not maximize” the cost of any service.

This said, the all-electric cars do not need customary servicing like gas or diesel vehicles, and so, the service policy may not even be used unless a major issue crops up, like with the battery or electronics.

“As such, we are comfortable making the annual checkup entirely optional,” said Tesla. “There is still value to having Tesla look at the car once a year for things like tire alignment, to address a few things here & there and perform any hardware upgrades – our goal is not just to fix things, but to make the car better than it was. However, even if you never bring in the car, your warranty is still valid.”

On the other hand, if the battery or electronics have an issue, Musk said this would be a no-fault thing, and Tesla would not snivel if the owner failed even to have taken minimal steps to become familiarized with the vehicle’s operations and care.

“The intent is to provide complete peace of mind about owning your Model S even if you never read or followed the instructions in the manual,” said Tesla.

Unlike the Roadsters which had a “bricking” problem known to be possible, the Model S is designed to be more fool-proof, so if something goes wrong inside the standard 8-year warranty period, Tesla will cover it, Musk said.

He said Tesla will fix a warranted battery as needed, and if this happens a few years from now, and there happens to be an updated battery available, there may be some leeway in upgrading at that point, it was implied.

Exceptions to the warranty would be such as from collision damage, intentional abuse, or if the battery pack had been opened by non-Tesla personnel.

Musk said the customer-centric program was as close to a dream policy as they could make it. He said he and Tesla designed its provisions putting themselves in customers’ shoes, imagining what they would want in an ideal arrangement if they were the customer.

Showing Itself Smart

While Tesla is bold enough to say its cars are the world’s best, Tesla is never so arrogant as to come out and declare something like “we are smarter,” yet smarter it is potentially showing itself to be.

Is it any wonder auto dealership associations are fighting Tesla’s unorthodox retail store and service center infiltration into their domain, and in cases looking at Tesla like the incarnation of the devil himself?

Talk about upsetting the old way of doing things.

Musk said he tells his service centers not to try and make a profit. He said Tesla is making scant profits selling the cars at this point too.

Of course Tesla is most definitely in business for profit, but how it is aiming to go about achieving this is altogether different.

Traditional dealerships have disparagingly been called “stealerships” by some, and in any case, back-end profits from parts and service are big business to help make up for thin margins perceived from the initial car sale.

Over the years, while many traditional dealerships have made loyal customers who value the relationship, in other cases some dealerships have engendered no love among people who have felt less than valued, if not overcharged or outright burned.

Further, the relationship between salespeople and customer, while typically marked with smiles and surface cordiality, can often behind the scenes be seen as an adversarial affair marked by ambivalence on both sides of the table.

Musk and Tesla are making big efforts to destroy this paradigm.

He said his agenda is not a short-term gain in sales, but long-term loyalty, ostensibly by earning it by maximizing the quality of the service experience.

Reporters today asked Musk what drove him to make the decision – was it knowledge of looming problems he wanted to pre-empt? Was it knowledge of current issues he wanted to head off at the pass?

Surely there have been some issues, but Musk said so far not one battery has failed at the module or cell level, and his goal was planting seeds of long-term buyer trust.

“We want to say ‘just don’t worry about the battery, its going to be fine,’” he told reporters in characterizing the spirit of intent behind Tesla’s motives.

Consumers today are naturally concerned with the expensive battery pack that, being new technology, is due to sooner or later be updated. Jumping into the EV waters does make many people take pause, especially at the $70,000-$110,000-plus prices Tesla is charging for its first sedan.

It would appear Tesla is positioning itself for an above-Mercedes-Benz-level experience, and says it wants to soften the way to the point of being no cause for fear.

Musk said he’d been preoccupied until recently with car design, supply chain, and other issues with launching the Model S, and now has turned his attention to ownership and service issues for Tesla’s growing customer base.

Of course, it all comes at a price, so the program is really like being well insured. It does not guaranty nothing will go wrong, but it is intended to make it as easy as possible should anything need attending to.

Customers who opt in will not need to sit around a dealership listening to air-impact tools ratcheting away in the service bays, with a TV and stale coffee to keep them company.

Instead they get to stay home with a top-line loaner delivered to their door for any reason they need their car looked at.

As for whether this will apply to the Model X and future cars, Musk said Tesla has that as an “aspirational” goal, but would not commit unequivocally that it will.

He said to lower its costs, Tesla may need to bundle out some of the services, but did leave open the possibility the same program could be had in the future for pending models.

The post Tesla Announces ‘World’s Best’ Service Program appeared first on HybridCars.com.

The dealers brought the suit against Tesla in October 2012 for allegedly violating state franchise law when Tesla opened one of its stores in a Natick, Mass., shopping mall.

Earlier this month Norfolk County Superior Court Judge Kenneth Fishman dismissed the suit for lack of standing.

Robert O’Koniewski, executive vice president of the dealers association, told Automotive News in an e-mail this week that the association is seeking an appeal because Tesla’s store model is clearly prohibited by Massachusetts’ dealer franchise statute.

“Tesla is spending considerable sums of money across the country in an effort to exploit what they see to be gaps in states’ franchise laws,” O’Koniewski said.

“The law is the law. Follow it,” he said.

Automotive News

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Qualified by Tesla as a key step toward beginning worldwide distribution of Model S, Tesla Motors announced that it will begin operations this month at this new European Distribution Center.

This new facility will serve as Tesla’s European service and parts headquarters, as well as the final assembly and distribution point for Model S vehicles sold in Europe.

Tesla confirmed general production of European left-hand drive Model S is still planned to begin in March 2013.

Tesla’s new European 62,000 square foot facility is centrally located to enable efficient, timely and cost effective operations throughout Europe.

Starting this month, the distribution center will begin stocking parts for both the Tesla Roadster and Model S. In addition to parts warehousing, Tesla plans to utilize this facility for vehicle importing operations, final vehicle assembly and distribution, service headquarters, technical training operations, parts remanufacturing, collision repair and more.

Tesla says its decision to locate the new European Distribution Center in Tilburg is the result of almost two years of on-going cooperation between Tesla, BOM Foreign Investments, NFIA (Netherlands Foreign Investment Agency), CBRE Group, Inc. and the City of Tilburg.

Worldwide, Tesla has received more than 13,000 reservations for its Model S.

Individuals interested in employment at the Tesla European Distribution Center in Tilburg should send resumes and inquiries to tilburgrecruitment@teslamotors.com.

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