Tesla posts its fourth consecutive fourth quarterly profit, clearly the pandemic did not make a significant dent to the Electric Vehicle business.
The Silicon Valley auto maker found a way, helped by the sale of regulatory tax credits, to push out a US$104 million profit in Q2.
Whilst sales are on track and the company is delivering profits, Tesla has also pulled back slightly from its pre-pandemic goal of delivery over 500,000 vehicles this year. If successful, this would mean a 36% surge from 2019. Elon Musk maintained his target to deliver 500,000 vehicles but also added that achieving that goal had become more difficult.
What else is making the headlines? Musk said that Tesla has chosen a location near Austin, Texas for its second US assembly plant for its vehicles. This is where Tesla will build pickups and semitrailer trucks, as well as Model 3 and Y compact models for its Eastern US markets.
The road to profitability
Tesla shares have been skyrocketing as of late, even Elon Musk’s tweets cannot bring it down. However, it hasn’t always been easy. Tesla has lost more than US$6.78 billion since 2003 and neared financial collapse on several occasions, including in 2008 and 2018 as the company struggled to bring out the Model 3.
Musk achieved a turnaround for the company, and did what many thought was near impossible; making electronic vehicles a sustainable, money making business. Musk started seeing profitability in the second half of last year as the Model 3 fuelled large growth and especially after Tesla successfully opened its first overseas assembly factory in China. The new factory and considerably lower labor costs did a lot to “trim the fat” in Tesla’s book, which meant it was on the faster track to reach profitability.
During April, Musk was involved in a battle with the state of California, when he refused to close down the Tesla factory despite orders to halt operations to contain Coronavirus.
Tesla has still maintained this “controversial, bad boy” stock personality on Wall Street though, most likely because its valuation is insanely high with a somewhat insane stock price. Take the two top-selling carmakers in the world, Toyota and Volkswagen, combine Ford, the stock market still values Tesla higher than all three together, whilst selling a lot less cars.
Now, because Tesla reported another quarterly profit this week (4 consecutive quarters too), the company will have cleared the last big hurdle for entry into the S&P 500, which means it will soon be up for grabs on index funds. This, all comes from the brain of one guy who once tweeted “Tesla stock price is too high imo”.
We think it’s a fascinating story. Are you bullish on Tesla?
