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Businesses Transportation The Almighty Buck Technology

Tesla Reports Third-Quarter Profit That Beats Market Expectations (cnbc.com) 195

Rei writes: When Tesla announced late last year that it was targeting sustained profitability in the second half of 2018, reaffirming this target throughout the year, the markets reacted with skepticism. Indeed, despite repeated insistence that the company had no need for a capital round, news analysts have treated the concept of Tesla dilution to raise more capital as inevitable and urgent to pay off convertible bonds next spring, even suggesting insidious theories that the reason it hadn't was that it "couldn't."

Well, today Tesla put the doubts to rest with a blockbuster Q3 report -- not simply eking out a profit and small free cash flow growth, but $2.92 per-share profit and $881 million free cash flow -- almost raising the entire value of their convertible bond debt in a single quarter. While many were skeptical about Tesla's claims that it would go from near zero profit margin on Model 3s to their claimed target of 15%, Tesla instead hit a 20% margin on the Model 3 (now the highest-revenue car in the U.S.), with a 25.8% overall automotive gross margin. This was all achieved with only $52 million worth of zero-emission vehicle credits claimed this quarter. While Tesla bears will likely claim that this quarter was a one-off that won't be repeated, Tesla reiterates guidance for sustained profitability from herein, barring a force majeure event.

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Tesla Reports Third-Quarter Profit That Beats Market Expectations

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  • Waiting to hear... (Score:5, Insightful)

    by MachineShedFred ( 621896 ) on Wednesday October 24, 2018 @07:52PM (#57532979) Journal

    I'm waiting to hear how Tesla is losing money on each car it sells, such as some people have been saying around here (FALSELY) for months. If they lose money on each car they sell, how did they wildly beat all the analysts by selling more of them?

    When everyone is telling you that you are wrong, sometimes it's a good idea to gain a little objectivity and at least examine the possibility that you actually are wrong.

    • they make it up on volume.

    • by larryjoe ( 135075 ) on Wednesday October 24, 2018 @09:35PM (#57533413)

      I'm waiting to hear how Tesla is losing money on each car it sells, such as some people have been saying around here (FALSELY) for months. If they lose money on each car they sell, how did they wildly beat all the analysts by selling more of them?

      When everyone is telling you that you are wrong, sometimes it's a good idea to gain a little objectivity and at least examine the possibility that you actually are wrong.

      Tesla had its best quarter in a while. Hopefully, it can continue to execute in manufacturing cars and meet future debt payments. It's not out of the wood yet, but the direction looks good. A strong, successful Tesla will be good for consumers, the car market, and even for other car companies.

      However, since it's Tesla and Musk, the report stretches facts somewhat. "Model 3 was the best-selling car in the US in terms of revenue and the 5th best-selling car in terms of volume." Well, that's technically true, if you exclude the top-6(!) selling vehicles in the US. That is, if you exclude the 65-70% of the car market represented by trucks and SUVs, which are technically not cars, then the Model 3 is the top revenue seller. But, that doesn't sound as impressive, even though it actually is.

      • by dgatwood ( 11270 ) on Thursday October 25, 2018 @01:33AM (#57533961) Homepage Journal

        Tesla had its best quarter in a while. Hopefully, it can continue to execute in manufacturing cars and meet future debt payments. It's not out of the wood yet, but the direction looks good. A strong, successful Tesla will be good for consumers, the car market, and even for other car companies.

        However, since it's Tesla and Musk, the report stretches facts somewhat. "Model 3 was the best-selling car in the US in terms of revenue and the 5th best-selling car in terms of volume." Well, that's technically true, if you exclude the top-6(!) selling vehicles in the US. That is, if you exclude the 65-70% of the car market represented by trucks and SUVs, which are technically not cars, then the Model 3 is the top revenue seller. But, that doesn't sound as impressive, even though it actually is.

        Agreed. For a car company that didn't exist twenty years ago, and whose market share was within the margin of error five years ago, even being #11 is pretty freaking amazing.

    • by sjbe ( 173966 ) on Thursday October 25, 2018 @07:35AM (#57534729)

      I'm waiting to hear how Tesla is losing money on each car it sells, such as some people have been saying around here (FALSELY) for months.

      Tesla HAS been losing money on each car they sell. That is a factual statement. But it doesn't mean what some people think it means. People here keep confusing gross margin [wikipedia.org] with net margin [wikipedia.org] and haven't a clue what free cash flow [wikipedia.org] is or fixed costs [wikipedia.org] or variable costs [wikipedia.org].

      It's absolutely normal for a new product to lose money on the first units they produce because they haven't produced enough units to amortize the fixed costs [wikipedia.org] over. Here's a oversimplified totally-made-up example. I spend $1,000,000 making an assembly line - one time cost never to be repeated. It also costs $500,000 per year to operate the assembly line no matter how many units I make whether it be 1 or 100,000. So before I make a single unit I have $1.5 million in operating costs. Let's say I'm selling a car for $50,000 and my actual cost of labor and materials in that car is $40,000 so I have a gross profit of $10,000 per vehicle. That means the first 150 vehicles I make are going to be sold at a loss. I also have to sell a minimum of 50 vehicles every year just to cover the fixed costs of operation.

      Tesla is in that exact situation, just with much larger numbers. The have the added wrinkle that they also have a lot of debt to service (around $11 billion reportedly) which can be treated as an additional fixed cost.

      • Tesla HAS been losing money on each car they sell. That is a factual statement. But it doesn't mean what some people think it means.

        Nice try, but no. "Tesla is still losing money" might mean what you describe. But "on each car they sell" is clearly referring to the per-car production cost versus the per-car price.

        By the way, there is no fact when things are badly defined. To your credit, you defined what you mean. Usually those who stress they relay "facts" carefully avoid that step, making sure they can endlessly debate/troll.

        • Nice try, but no. "Tesla is still losing money" might mean what you describe.

          I'm among other things a certified accountant and my specialty is corporate cost accounting in manufacturing. There is no "might" qualifier here. I described exactly what is happening with Tesla from a big picture perspective. It's nothing unusual. My company has exactly the same situation of every product we sell albeit on a much smaller scale. The company you work for does too.

          But "on each car they sell" is clearly referring to the per-car production cost versus the per-car price.

          Per car production costs are not a fixed number and it's a mistake to think they are. You cannot simply take the cost of th

  • by Bruce Perens ( 3872 ) <bruce@perens.com> on Wednesday October 24, 2018 @08:04PM (#57533055) Homepage Journal

    I am a big Tesla fan. But we should acknowledge that there are still some problems. Mainly that the spare-parts supply chain hasn't caught up with manufacturing, leaving cars inoperable for months while Tesla's own shops wait for parts. If you want right-to-repair, Tesla hasn't caught up to that by making diagnostic tools available or parts available to non-partner shops and end-users.

  • by AlanObject ( 3603453 ) on Wednesday October 24, 2018 @08:16PM (#57533095)

    I actually pay attention to all the Tesla/Musk/Tesla/Musk critics out there and follow their arguments about how the company is going to crash and burn and Musk is delusional and the technology won't work and the production can't work and the quality is crap gasoline is actually greener and cheaper and and the major automakers are going to bury them and the workers have reverted to savagery and yadda yadda.

    I have been following all that for, what, five years now? How many portentous pronouncements of Tesla and/or Musk's demise has there been? I have lost count.

    A few days ago my e-trade board delivered this little news nugget:

    Citron Research, which has previously advocated short positions on Tesla, says it has changed course, and that the electric car maker is "destroying the competition, as Citron makes the case for why it's taking a long-term view.

    So apparently there are short sellers out there will actually fold up the tent for another from-scratch assessment. Granted, they were wrong before so they could be wrong again. Tesla could still crash and burn or at least hit a major bump in the road. But if it does it will have nothing to do with what the chronic naysayers that post here say.

  • by kamapuaa ( 555446 ) on Wednesday October 24, 2018 @08:33PM (#57533179) Homepage

    Well, shit. Looks like LynwoodRooster is going to have to come up with a whole new series of anti-Tesla rants to copy & paste into Slashdot Tesla stories.

    • he/she has to recover from the shock of reality first...
  • by jimbrooking ( 1909170 ) on Wednesday October 24, 2018 @08:35PM (#57533191)
    Am eagerly awaiting delivery of my new Model 3 !
  • by 140Mandak262Jamuna ( 970587 ) on Wednesday October 24, 2018 @08:52PM (#57533261) Journal
    Elong said Tesla goes 4 miles per kWh, while the competition barely manages 2.6 miles/kWh to 3. (I think he is using Jaguar IPace not Bolt and Leaf). That allows him to get greater range using smaller battery. And Tesla makes batteries cheaper than anyone else (I think about 25% cheaper) that gives Tesla the edge and competitiveness.

    Elon also said "I begged the other companies to invest in battery capacity and charging networks" according to some live blogging site. And some thing along the lines of if they make an adapter he will let them use Tesla super chargers. Not sure if he really said that or these guys are putting words in his mouth.

    • And Tesla makes batteries cheaper than anyone else (I think about 25% cheaper) that gives Tesla the edge and competitiveness.

      Any source on the 25% cheaper battery cost? A recent guess [seekingalpha.com] deduces that Nissan manages lower-cost batteries.

      Maybe once Gigafactory finishes ramping up, they will be the cost leader.

      • by 140Mandak262Jamuna ( 970587 ) on Thursday October 25, 2018 @05:49AM (#57534429) Journal
        That was a claim by Tesla. They did not provide citations.

        The last Monroe tear down (the second one where he blasted Tesla for a dumb design of the body, that would cost 2000$ more to manufacture compared to others) said that the battery pack innovations (gluing cells to the wall of the cooling conduits etc) and the fully integrated mother board, and the wiring that allows charge current to be rerouted dynamically, individual cell level monitoring etc are way ahead of the competition.

        Last time I saw the plots, battery costs are trending low for all, with about a seven year half life, for all. The curves are parallel. But Tesla is shifted down by a constant amount. Since the curve is very flat, almost horizontal, it gives Tesla a three year lead over others.

        Tesla claimed 130$ /kWh at pack level and 100$/kWh in the last quarter call. It has suggested breaking the 100$/kWh barrier any time soon. But did not say whether time scale is our time scale or Elon(gated) time scale :-)

    • by pezpunk ( 205653 )

      Tesla and Elon have repeatedly stated that any other car company is welcome to use their supercharging network, given a) they develop their own adapter and b) they pay into the network proportionally to how much energy they use. seems like a great deal to me -- access to a huge network of chargers, and they dont have to pay for the creation of that infrastructure or its upkeep, just the power they draw from it.

      the only company so far to approach them about this offer is Bollinger Motors, small NYC electric

      • my sense is that pure egotistical refusal to acknowledge Tesla's success and significance is the primary reason none of the major manufacturers are interested in taking advantage of the only existing high-speed charging network.

        My senses is they thought "We don't run gas stations. Why would we run charger stations?"

    • Yeah, not sure what cars he's talking about. My Honda Fit EV got 4 miles per kWh if you drove normally, if you really worked at it you could get 6.5 miles per kWh... No way the Tesla could do that... But I'm happy with the ~280-300 Wh/m I'm getting on my M3P+... It's a lot better than the 19 mpg I was getting with my Subaru STi...

      He probably is talking about some of the newer cars like the Jag... whatever...

  • by 140Mandak262Jamuna ( 970587 ) on Wednesday October 24, 2018 @08:55PM (#57533281) Journal
    The bears have to make a hard choice. They were hoping a cash crunch of debt payment in Q4 2018 and Q1 2019 of about 1.5 billion will choke the company. It was already burning through cash at some prodigal rate in Q1 and Q2. They seem to have miscalculated. Last reports from S3 Partners was that there was some 32 million shares outstanding. Wondering how many covered when the price crashed to 250 and got out with some profits. How many are still holding out waiting for Tesla to go bankrupt.
  • TLDR the financial report but if the 25.8% gross margin on M3s is much above car maker standards, does it make M3s overpriced?
    Does this profit margin include R&D and other operational overhead is it it just based on BOM and mfg?

    • An item is overpriced when it does not sell. While there is plenty of demand, and not enough supply, that is an indication that the car is underpriced, not over.
    • Every single one leaving the factory is bought and paid for, with a list of people that want to hand over money for one. That basically proves it is not overpriced, as the market seems to love the price it is at and the value it represents.

  • Don't think this is happening then look what Ford has done lately. Like what happened with the Apple iPhone and Samsung going with the same trendy design, Ford Motors did the same bullshit with the Tesla model s. If you look carefully at a 2009 Tesla model s and compare it to a 2009 Ford fusion you see that they are different animals altogether and have little in common style wise.

    Then suddenly the look and idea of no petrol with a Tesla s got sexy and Ford essentially cloned the look of a Tesla model s in

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