Tesla Has Another Profitable Quarter

Tesla Has Another Profitable Quarter

On Wednesday, Tesla, Inc. TSLA continued its meteoric rise as it delivered its fifth straight quarterly profit. Tesla has also set a revenue record, triggered by a boost in vehicle deliveries as well as sales of pollution credits to other automakers.

Key Q3 figures

Revenue rose 30% year-on-year, from $6.30 billion the same period last year to a record $8.77 billion. Analysts had expected revenue of $8.36 billion, according to Refinitiv. But Tesla would not have achieved a profitable quarter without sales of regulatory credits which amounted to $397 million. In fact, this is the fourth consecutive quarter that Tesla would not have been profitable without this revenue source that makes up 7% of total automotive revenue.

Net income was $331 million, which was more than triple its second quarter earnings which were impacted by the temporary plant shutdown due to the pandemic. Excluding items, profit amounted to 76 cents per share. Operating income also expanded to $809 million, improving operating margins to 9.2%.

Tesla is no longer starving for cash as it ended the quarter with $14.5 billion in cash on hand, marking a 69% increase in just three months.

Competition

Musk announced Cybertruck orders will be delivered in 2022 or the end of next year at the earliest. But on the same day, General Motors Company GM revealed an electric version of its Hummer pickup truck is set to challenge Tesla's futuristic Cybertruck. Back in September, Ford Motor Company F also announced that it would be slashing the price on its Mustang Mach E to increase its competitiveness.

As more competitors enter the race, environmental regulatory credit will dry up as a source of revenue for Tesla. It has been a meaningful source of revenue for more than a year now.

Tech improvements

Back in September, Musk unveiled a sweeping new vision for Tesla's battery manufacturing plans and a road map to achieving an affordable EV. Not to mention the ambitious plan to deliver up to 40% more EVs than last year. On Wednesday, the focus on improving manufacturing cost, efficiency and capacity as quickly as possible was evident. But Musk said the company won't count on its own cell production before 2022, so it will continue relying on Panasonic Corporation PCRFY and other external partners for battery supplies. But its Berlin factory will begin production as early as next year while also building  its biggest battery and vehicle factory yet in Austin, Texas, and at great speed.

Outlook

The target to deliver half a million vehicles by the end of this unprecedented year is still on. This implies Tesla will have to significantly ramp up its sales in the undergoing quarter. With a market cap exceeding $394 billion, Tesla already became the largest global automaker, despite lagging its competitors in key financial figures, namely sales, revenue and profit. But unlike its automotive peers, Tesla has defied the pandemic-induced downturn that drowned the whole auto industry as it surfed its way through the pandemic, with its shares gaining 400% this year. By the looks of it, Tesla has sufficient liquidity to fund Musk's roadmap and long-term ambitions.

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