By on July 23, 2020

Everything was moving in Tesla’s favor Wednesday night, with the electric automaker reporting an unexpected quarterly profit — its fourth in a row — for Q2 2020. This positive financial news, made possible by other automakers’ hunger for regulatory credits, sent the company’s already elevated (overvalued?) stock closer to the face of God.

At the same time, CEO Elon Musk announced something long suspected: That Tesla’s next domestic assembly plant will set up shop in Austin, Texas.

Tesla’s GAAP net income of $104 million followed a quarter that saw automotive revenues touch $5.18 billion, a slight uptick from Q1 but a modest 4 percent decrease from a year ago. Total revenue amounted to just over $6 billion, helped along by $428 million in regulatory credit sales.

Now the industry’s go-to source for such green indulgences, Tesla’s credit haul was nearly triple the sum recorded in the same quarter last year. In this case, it was enough revenue to push the company into the black during a time of both pandemic-borne fiscal hardship and previously-planned expansion.

Elsewhere on the company’s balance sheet, Tesla’s operating margin sits at 5.4 percent and cash flow has rebounded into the positive after reversing course last quarter. Available cash? $8.6 billion.

And Tesla will need that money, as there’s an assembly plant to finish in Germany, key to supplying that rapidly greening market with rolling stock, with a second U.S. plant waiting to get off the ground.

In an earnings call reported on by CNBC, Musk said his desired locale of Texas has come to pass. The automaker plans to build a sprawling assembly plant near Austin to supply the Eastern half of the United States with Model 3 and Y vehicles, as well as the upcoming Cybertruck and Semi. The company’s existing Fremont, California plant will continue taking care of global Model S and X production, as well as Model 3 and Y production for the Western U.S.

Musk characterized the planned second facility, situated 15 minutes from Austin (on 2,000 acres) as an “ecological paradise” complete with riverfront walking trails. Tax breaks totaling nearly $15 million are part of that land deal.

During the call, Musk said Tesla is not trying to be “super profitable” — rather, its main objective is sustainable growth. The company’s stock rose more than 5 percent in pre-market Thursday trading.

[Image: JL IMAGES/Shutterstock]

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30 Comments on “Tesla: A Surprise Profit, a Stock Bounce, and a Factory Site Secured...”


  • avatar
    SCE to AUX

    Hopefully Austin and Berlin will do a better job painting cars.

    • 0 avatar
      mcs

      @SCE: …and a few other issues as well! Hopefully, with more factories, they won’t be pushing their assembly lines as hard. That’s where I think the quality issues are coming from.

      I think they need to keep diversifying away from autos. Income from the growing power distribution business and their biotech divisions could insulate them from the ups and downs of the auto market.

    • 0 avatar
      Vulpine

      @SCE to AUX: “Hopefully Austin and Berlin will do a better job painting cars.”

      —- Logically, they should, since they won’t have the paint volume constraints there that they do in Fremont due to regulations.

  • avatar
    Nick_515

    Steph, you’ve got to include a prominent trigger alert with headlines like this. The B&B have a sensitive constitution towards Tesla good news.

    • 0 avatar
      Lie2me

      Yeah, you’ll have to tear the steering wheel of my ICE vehicle from my cold dead hands

      Oh, the irony of Tesla setting up shop in the biggest oil producing state in the country. Well played, Elon

      • 0 avatar
        volvo

        No irony needed. Texas is the #1 natural gas producer in the country. How do you think most of that electricity is produced?

        Given that for decades that gas was just burned at the wellhead electric generation is probably a good use for it even given the inefficiencies of electric production, distribution and charging of an electro-chemical storage unit.

        I have come around to the postilion that Tesla is the real thing even though the article seems to say that current profits come from selling carbon credits and not from actual vehicle production and sales.

        • 0 avatar
          Lie2me

          What’s more profitable for Texas, the amount of oil it takes to produce a tank of gas or the amount of natural gas it takes for one charge of a Tesla

        • 0 avatar
          Scoutdude

          All of their profits have been from selling carbon credits. Any quarter that they have reported a profit the income from sales of credits exceeded the profit significantly.

          • 0 avatar
            Art Vandelay

            The article said 6 billion in revenue from car sales, 418 million from credits so that claim seems dubious.

        • 0 avatar
          Vulpine

          @volvo: “I have come around to the postilion that Tesla is the real thing even though the article seems to say that current profits come from selling carbon credits and not from actual vehicle production and sales.”

          — Those credits have just helped Tesla carry their numbers over the top, when you consider that they brought in more than $6.04Billion in sales.

        • 0 avatar
          Dave M.

          I just returned from a trip through west Texas. The wind farms there and in north Texas are astounding.

  • avatar
    DC Bruce

    It’s always fun to hate on Tesla, especially because Elon Musk seems to resemble a younger, hipper version of Donald Trump. That said, why isn’t the market for energy credits just like any other financial market? Tesla isn’t the only maker of EVs that would generate this credit. Presumably there’s competition and it’s not like selling energy credits is some sort of trade secret proprietary to Tesla. So, if Tesla “cracked the code,” good for them!

    To be sure, I find the interiors of Tesla vehicles unappealing and their paint/assembly quality below what one would expect at the price. And I find even Teslas to be impractical as compared to ICE cars. Others, obviously, feel differently; the tech is very cool. So, good for them; and good for Tesla for establishing a “green field” company in an industry with massive barriers to entry.

    That said, the stock price is in an obvious bubble; but the company itself seems viable and has done a good job of surmounting its problems so far.

    • 0 avatar
      Art Vandelay

      You can read articles about dot com startups in the 90’s and just substitute EV for dot com and most of the articles would hold true today.

      Having said that though, some of those 90’s companies were in fact the real deal. Tesla’s stock price may be a bit high, but I think they are more Microsoft (Yes they are older, but they rode the internet wave in the 90’s) than something like theglobe or pets .com. They will be here in 20 years and doing just fine. Then there are the Fiskers and Nikola’s. Those would be today’s Pixelon. Broke investors holding worthless stock, SEC investigations and people getting sentenced to Club Fed prisons.

    • 0 avatar
      SCE to AUX

      For a long time, Nissan received more carbon credit income than Tesla, but Tesla gets all the hate. GM, Ford, and BMW have all generated such revenue with their EVs. IIRC, one of the biggest payers is FCA, which they seem happy to do.

      The fake CC economy certainly benefits Tesla the most, but contrary to some people’s opinions, they didn’t invent it.

    • 0 avatar
      Scoutdude

      Yes there is a market for credits and at least in the past Nissan has sold quite a few, but Tesla is the leading seller in the market. FCA has been the leading buyer for many years.

      The problem is that as more and more EVs come to market the supply of credits grows as demand shrinks. That means Tesla isn’t going to be able to continue to sell cars at a loss to make a profit.

    • 0 avatar
      Lie2me

      “Elon Musk seems to resemble a younger, hipper version of Donald Trump.”

      When did Trump ever head a successful company?

      Elon Musk has a genius IQ, Trump aced a cognitive test

  • avatar
    dukeisduke

    I won’t hate on Tesla – I just wonder how profitable they’ll be if/when their carbon credit income dries up?

    One of the TV stations around here (DFW) referred to it as a “Gigafactory” in a screen caption, and then proceeded to talk about vehicle assembly.

    This should provide some income for COTA, assuming Tesla rents some time on it as their test track.

    • 0 avatar
      Art Vandelay

      So long as they keep putting the money they make off of those carbon credits back into the company and expanding their real manufacturing capabilities and growing the core business, I’d imagine they will be fine.

  • avatar
    mcs

    “And I find even Teslas to be impractical as compared to ICE cars.”

    Having put almost 100k miles on an EV, I’ve never totally understood the impractical argument. I suppose it applies if you live in an apartment/condo and don’t have at-work charging. Otherwise, you get a 300 to 400-mile range car that you can charge at home. Solar panel cost has dropped to $1.49 per watt so you can even make your own fuel hassle-free. You also don’t have to hassle with oil changes. If you don’t do your own changes, you have to make appointments and take time out of your day to get it done. For many people, EVs are more practical than ICEs.

    I don’t think you can really make a blanket statement that EVs are impractical. Like every other type of vehicle variation, it depends on an individual as to what’s practical and what isn’t. We have even more choices these days.

    While I do agree that Tesla is in a bubble, I think their moves outside of the auto sector are promising and will eventually be larger than their auto business. Power distribution has a huge potential as well as their new RNA Bioreactors for the pharmaceutical industry. (https://patentscope.wipo.int/search/en/detail.jsf?docId=WO2020002598)

    Like Amazon moving beyond books, Tesla is moving beyond cars and could become a fairly large conglomerate. There has even been talk of taking the heat pump technology from the Y and using it for commercial and residential buildings. Now that they are in the cell manufacturing business, they could even move into the consumer battery market. That crazy high valuation could look conservative in another decade.

    https://www.forbes.com/sites/miriamtuerk/2018/07/10/power-utilities-shouldnt-underestimate-the-power-of-tesla-heres-why/#555a38b258a6

    • 0 avatar
      Art Vandelay

      But heat pump technology has been in commercial and residential buildings for decades.

      • 0 avatar
        dukeisduke

        True. The houses on my street, built in the late ’90s (except for three built a few years earlier) are all-electric, and use heat pumps for the HVAC system.

        • 0 avatar
          Vulpine

          I have a heat pump system in my house too… One problem though, because of its no-valve design, I have one room in my house that gets hotter than any other in the summer and another that stays colder than any other during the winter. This is where Tesla’s 8-valve heat pump has the advantage, don’t you think?

          • 0 avatar
            Art Vandelay

            I don’t know…I don’t have this issue with my heat pumps. In a household application I’d think such issues were managed via dampers and duct sizing. This is honestly the first I’ve heard of it and all 4 houses I’ve owned had them

          • 0 avatar
            mcs

            I’d be interested in the low-temperature capabilities of the Tesla heat pump. My current pump has to shut down below 40F and the conventional heat has to take over. For a car, a heat-pump has to operate in sub-zero F temps, unless they are switching to resistant heat at that point. If they don’t switch to resistive, that technology would have my attention.

            A home heat pump would also be a good complement to a solar/powerwall system for home heating with fossil fuels in cold climates. I know that once I get my solar installation (Telsa is down to $1.49/Watt for solar panels), I’ll definitely be looking for a heat pump that can handle sub-zero temps.

          • 0 avatar
            Art Vandelay

            That’s a good point @MCS. Home installations do require a resistive back up system as have cars I’ve seen them in. If he has gotten around that issue that would be worth adapting but I thought that was just a design limitation of how they work.

  • avatar
    2manycars

    How “practical” a purchase will a 10-15 year-old electric car with an out-of-warranty, decaying battery pack be? Not to mention the other expensive gee-wiz tech that will be breaking down.

    A Toyota Corolla or Camry that age likely will have many more trouble-free years left, and will work just fine for those many, MANY people who have no place for a home charger (let alone two or three in multi-car households), and don’t have a place at work to charge.

    I think Tesla owners are living in la-la land to an extent and have no concept of the way most people live. Electric cars in their current state of development simply make no sense, either economically or from a practicality standpoint, for the vast majority of people. I’ll certainly never buy one.

    Also, take away the carbon credit scam that Musk uses to mulct other companies and see how long Tesla makes a profit. It’s a vampire company.

    • 0 avatar
      Vulpine

      @2manycars: “Also, take away the carbon credit scam that Musk uses to mulct other companies and see how long Tesla makes a profit. It’s a vampire company.”

      — I think you’d be surprised. Tesla would be foolish to ignore an opportunity to save money but considering their revenues over the last year, they don’t really NEED those credits; they’re just using them to pad their growth and keep their numbers in the black while spending more in that growth.

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