By Heather Somerville
Tesla Inc. extended its profitability streak in the third
quarter and promised global production increases, in the latest
sign the coronavirus pandemic has done little to dent Chief
Executive Elon Musk's push to take electric vehicles
The Silicon Valley car maker on Wednesday posted a net profit of
$331 million for the three-month period ended Sept. 30. It marks
Tesla's fifth-consecutive quarter in the black and keeps the
company on track for 2020 to be the first calendar year of
profitability after years of losses.
Mr. Musk called it Tesla's "best quarter in history."
The company forecast significant production growth next year,
with plans including the roll out of its all-electric semitrailer
truck and, potentially, its pickup truck. It also projected more
cars coming out of its China factory and that its newest plants in
Berlin and Texas would start making vehicles. The aggressive
ramp-up puts Tesla a step closer to achieving the global footprint
Mr. Musk has long sought.
Tesla also revived a pre-pandemic target to build at least
500,000 vehicles this year, which Mr. Musk laid out in January, an
increase of at least 36% from last year. Tesla hadn't formally
withdrawn that guidance but until now had largely ignored the
projection that seemed improbable at the onset of the pandemic,
when it temporarily shut down its lone U.S. factory as local health
officials worked to contain the spread of the coronavirus.
"While achieving this goal has become more difficult, delivering
half a million vehicles in 2020 remains our target," the company
said. Reaching that lofty sales level will rely on building more
cars at its Shanghai factory, Tesla said, as well as further
improvements in logistics and delivery.
Mr. Musk, asked on an investor call if deliveries next year
could reach 840,000 to 1 million vehicles, said "it's in that
The pandemic disrupted Tesla's operations principally in the
second quarter, but the company quickly rebounded. Earlier this
month, Tesla reported record car sales for the third quarter, with
139,593 vehicle deliveries in the period, suggesting the target of
500,000 deliveries for the year was in reach.
Tesla posted a record $8.77 billion in revenue for the quarter,
a 39% jump from a year ago. Analysts surveyed by FactSet expected
sales of $8.28 billion.
The company was buoyed by efficiencies in manufacturing,
including lower battery and purchasing costs at its production
facility in China, as well as growing demand in that country for
electric cars. Its ability to sell emission credits to rivals to
meet regulatory requirements has padded the bottom line.
Shares were up more than 3% at about $438 in after-hours
trading. Tesla shares have roughly quintupled since the start of
"The real story was the ability to drive better margins despite
prices that are flat to down," said Toni Sacconaghi, an analyst
with Bernstein Research. "They sound pretty pedal-to-the-metal in
terms of growth."
Tesla has been trying to cut costs and build cars more
efficiently in part to reflect a shift in customers that are
increasingly buying its more-affordable Model 3 car and Model Y
sport-utility vehicle, rather than the higher-priced models that
would contribute a larger profit. The company said the factories in
Texas, Berlin and Shanghai would all produce Model Y vehicles next
"We expect our operating margin will continue to grow over time,
ultimately reaching industry-leading levels," Tesla said in its
However, Mr. Musk cautioned on the investor call that production
at the new factories will start off slowly and may take up to two
years to reach capacity.
The construction of sprawling new factories for battery-cell
manufacturing and car production come at a sizable cost. The
company said it plans to spend an additional $2 billion to $2.5
billion on capital expenditures in 2021 and 2022. Its bet is that a
large enough global footprint that enables Tesla to build cars in
the same market where they are delivered will continue to improve
Mr. Musk's goal to turn electric vehicles from a niche market to
having mass-market appeal appeared to gain traction in the second
half of last year as Model 3 sales fueled massive growth, and after
Tesla successfully opened its first overseas assembly factory in
China, where the company has churned out cars with lower-cost
Tesla posted a $143 million profit in the third quarter of last
year, and has stayed profitable since.
Mr. Musk has laid out a bold vision to be the world's largest
auto maker, although the entrepreneur has been prone to hyperbole.
At a shareholder event last month, he said he expects Tesla to
build 20 million cars annually within the decade, and laid out a
plan to use lower-cost batteries to make a $25,000 electric
vehicle, which would be significantly cheaper than anything Tesla
currently sells. "I do not think we lack for desire for our product
but we do lack for affordability," Mr. Musk said Wednesday.
Tesla said it has bolstered production at its factory in
Fremont, Calif., so that it can produce 500,000 Model 3 and Model Y
vehicles a year, a slight increase in capacity.
Its Berlin factory is under construction, and Tesla plans to
move in equipment in the coming weeks, with production starting
next year, the company said. Mr. Musk added that the Cybertruck, a
stainless-steel, futuristic and abrasive-looking truck the company
unveiled a year ago, would start shipping to customers at the end
of next year "if things go well" with most of the deliveries coming
The latest quarterly profit will likely revive debate about
Tesla joining the S&P 500 stock index. Tesla qualified for
inclusion in the index after reporting a profit in the second
quarter this year, but was left out in the latest update.
Write to Heather Somerville at Heather.Somerville@wsj.com
(END) Dow Jones Newswires
October 21, 2020 20:39 ET (00:39 GMT)
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