Tesla on track for first annual profit … thanks to rival car companies

Tesla is on track to do something it has never done before – make an annual profit. And it’s due, in part, to its rival car companies.

The company announced today that it has reported a profit for the fifth consecutive quarter. Which means Tesla, often derided for the gap between perception and profitability, is on track to report its first annual profit – ever – in 2020. It’s quite incredible for a company that was launched in 2003.

Issuing its quarterly report, Tesla said it made $US331million of profit in the three months to the end of September. Year-on-year that’s an impressive achievement, with the figure for the same quarter in 2019 just $US143m.

Incredibly, Tesla produced 145,000 new vehicles in the third quarter of 2020, and managed to deliver 139,600 of them. In simple terms, that means Tesla is selling just about everything it makes, with its cars being built to fulfil existing pre-order banks.

The 145,000 figure also represents a jump in production of about 50 per cent from the second quarter of this year, when pandemic restrictions slammed the brakes on its factories.

While its sales are impressive, it is the sale of CO2 credits to other car makers – who need them to meet environmental regulations – that also significantly boosted Tesla’s finances. It reported $US397m of credit revenue that third quarter alone.

Questions have been raised about whether Tesla’s phenomenal sales growth might be peaking, or even dropping. 

Some analysts believe Tesla sales in the US are slowing down and that there is a downward trend in other markets, including the all-important Chinese one. Also at risk is Tesla’s credit revenue, given more car companies are turning to EVs.

Tesla has cut its prices several times in the past year, and competition from tractional car makers in the EV space is only applying more pressure to its market position.

“Tesla is losing ground in Europe to fierce competitors,” says Vicki Bryan, the chief executive of research firm Bond Angle. She added that the new Model Y hatchback seemed to be stealing sales volume from Model 3 rather than adding to overall numbers.

Last month, Tesla boss Elon Musk tipped a sales boost of 30 to 40 per cent, year on year, which would add up to total sales of between 480,000 and 510,000 cars – and the company will need to sell 182,000 vehicles in the fourth quarter to breach the half-million mark.

Last year it delivered 112,000 cars in that same period. It remains to be seen whether sales will reach Musk’s predictions, but it does look as though the company will, finally, turn an annual profit in 2020.

And sales will only get bigger next year as Tesla brings online two new factories it is building in Austin, Texas, and Berlin in Germany.