No two ways about it–that was a great quarter. The rest of the industry has no excuses at all now.
The various minor shortfalls make the story more compelling, to my mind. They still aren’t at a consistent 5k/week, let alone 10k, and yet did very well in spite of that. Likewise with the gross margins; the letter itself acknowledges (not to mention the teardowns) that there is room to grow there. But that’s just icing on the cake, now, because they’ve shown a sustainable business model.
It’s pretty obvious that there’s still plenty of room for unit growth despite running through the backlog. Cheaper models, leasing, and shipments outside of North America are the big ones. I don’t think they have to worry about demand for a couple of years.
For not selling both compelling and profitable EVs. After a long series of excuses, the final one has been basically “sure, Tesla makes cool cars, but anyone can lose money making cars.”
Well, obviously I have nothing to do with that. I work for one of Tesla’s suppliers (soon to be not a supplier). I merely want Tesla to succeed because it’s very important to transition all ground transport to electric as quickly as possible. And Tesla manages to do their part in style.
For not lining up to perform propitiative fellatio on Elon Musk, whose erratic public behavior and mercurial leadership are all responsible for this triumph in doing the the thing that all stock owners everywhere expect from their investments, e.g. turn a profit.
The claim that they have done no financial jiggering to demonstrate a profit is risible given that everybody plays games to demonstrate a profit including pushing all costs into the previous quarter and accounts due into the next while claiming provisional sales. The third quarter of the calendar year is where companies often look to show peak profits because it is where analysts look to predict the subsequent years’ outlook. All of which is not to say that Tesla is not capable of making a net annual profit, but success in one quarter does not demonstrate that, particularly when facing steel, aluminum, and foreign component tariffs that won’t start to show their true impacts until next year (although many manufacturers are already raising prices and downgrading profit estimates because of the additional costs).
Disco Stu doesn’t advertise. But Rock Star Elon never passes on a chance for self-aggrandizement or smoking up on a podcast. I look forward to some exceptional antics from Musk in the next few days.
One quarter is an existence proof. If Tesla fucks up in the future, that’s on them. That doesn’t excuse anyone else for failing to produce a compelling EV. Profitability was the last remaining excuse. Tesla is profitable despite their manufacturing still not being on par with the rest of the industry. Any continued whining should be met with derision. I do look forward to what Lutz has to say on the matter–either eating crow, or making ever more laughable claims.
I like Tesla but I like EVs more. Whether or not Tesla ultimately survives is actually irrelevant now–the demonstration that EVs can be practical and profitable is one of the most important things they’ve ever done. Any other car company can step in if they want.
They don’t count sales as revenue until all paperwork is done and the car is delivered. If you think otherwise, take it up with their CFO.
ZEV credits allow some jiggering. But that was only $52M out of $312M. Doesn’t significantly change the picture if you think they should have applied half of that to the previous quarter.
There probably was some deferred investment when it comes to things like new Supercharger deployments–there are some indications that they slowed down for the quarter–but again, it’s not enough to change the overall picture.
The Model 3 was the fifth best selling car in the US in Q3, ahead of such richmobiles as the Nissan Sentra. Over half of the trade-ins had an original value of <$35k.
Incidentally, if you do want the most optimistic possible number with respect to counting revenue as early as possible and payments as late as possible, look at their net cash. That was a positive $731M this quarter. Obviously, that is significantly higher than either GAAP or non-GAAP numbers, but regardless, there is significant value in having cash in hand now.
One of my good friends is a high school chemistry teacher. She just bought a model 3. I have two other friends who work in the software industry who drive Teslas. Middle class, sure, but that’s not the same as “rich”, at least not here in silicon valley.
I say this as someone who is living an upper middle class lifestyle in a very expensive part of the country: I am rich. Do not confuse the matters of lifestyle and social norms with a high income.
The weirdness of places like New York, California, DC, and similar places is that there are people who have high incomes but don’t feel rich. But feelings of status don’t reflect the amount of money actually in one’s pocket.
I just looked it up. My household’s after tax income puts us in about the 60th percentile in the US. Yeah, we’re better off than most families, but we’re definitely not wealthy (except on a global scale). Very middle class. We have a mortgage in suburbia, in a place with above average cost of living, but not crazy high.
The price I paid for the Model 3 is right in line with the average prices across luxury vehicles, and after tax incentive will put it close to what people are paying for a full size truck, which are the top three best selling vehicles in the US. Obviously it takes some money to buy a luxury mid-size SUV, but it would be silly to say you have to be rich to afford one.
I know someone on another board who bought a Model 3, which would have to be one of the $60k ones- he drank the Kool-aid for sure, had to get one ASAP. and knowing what he does for a living, I don’t understand how in the name of hell he was able to afford it. unless it’s on an 84 month note or something.
For 2018 we’ll be in the 22% bracket, which has a huge range. That spans from people who no way can afford a $60k car to people who with budgeting and planning can do it.
The magic of leases and 72+ month loans have made luxury pickups and SUVs available to lots of people.