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Tesla reports first quarterly profit in more than three years
- generj 10y agoMost impressive here is a 70% increase in production. Note that this occurred while Model 3 production is still starting.
- forgetsusername 10y agoCashed in a large amount of ZEV credits, for a one-time revenue bump of $140MM. Excluding that, GAAP loss was $117MM. Big increase in accounts payable. But, all things considered, that's not bad.
- notatoad 10y agoit seems like i see this basic comment every time Tesla reports earnings. this specific credit might be a one-time thing, but they somehow find another one every quarter.
- greglindahl 10y agoDo you have a list?
- deleted 10y ago[deleted]
- NotSammyHagar 10y agoGood point to note the ZEV credits. The first time they showed a profit that was part of it. But those credits keep on coming, they aren't necessarily a one time thing. Other car companies that don't produce electric cars in abundance or at all will have to keep buying them until they do.
- coredog64 10y agoFCA had to be strong armed into building the 500e. Ford hasn't previously taken the electric Focus seriously, but word is that the 2017 model will be range competitive with the current Leaf. I believe I have read elsewhere that although GM will sell the Bolt in all 50 states, early inventory will be going to states with ZEV mandates. With all that, I could see a future in which those ZEV credits aren't nearly so valuable.
- annerajb 10y agoLG Chem the supplier for the GM Bolt battery said they expect more than 35k this sounds to me like the car is going to be aggressively prioritized in ZEV states.
- igravious 10y agoVery first line of the Update linked to in another comment, > The Tesla third quarter results reflect strong company-wide execution in many areas. Furthermore, we expect this to continue into Q4 and project positive GAAP net income (excluding non-cash stock-based compensation) despite ZEV credit sales in Q4 likely being negligible. https://news.ycombinator.com/item?id=12800234 https://news.ycombinator.com/item?id=12800234
- boomzilla 10y agoEr, should GAAP net income include SBC? Otherwise, it's non GAAP.
- igravious 10y agoDude (or dudette). I have no idea. I was merely responding to the assertion made up yonder. I was pointing out that while possibly not an incorrect assertion it is one that is contradicted by the estimated projections of the very first line from the report under discussion.
- forgetsusername 10y agoI'm not sure your point. That they expect profits to continue without the credits? I guess we will see. Not sure how this invalidates anything I wrote. I care less about projections than financial statements. Those credits composed a good chunk.
- greglindahl 10y agoIt's not a wild prediction, given that the new sensors means another surge in orders, which gives Tesla a chance to prioritize higher-margin, more expensive cars. I don't know how many potential buyers were waiting, but I was expecting a bump in sensors and compute power sooner than later.
- geertj 10y agoNot sure why you are getting downvoted. I am a Tesla bull, but you are correct. I'm very interested about the increase in AP. Hope the conf call will get into that.
- greglindahl 10y agoIf you're wondering who's buying and selling ZEV credits, here's the California score-card for Oct 2015 through August 1, 2016. No prices: https://www.arb.ca.gov/msprog/zevprog/zevcredits/2015zevcredits.htm https://www.arb.ca.gov/msprog/zevprog/zevcredits/2015zevcred... Tesla provides 80+% of the ZEV credits transferred, and the 2 biggest buyers are Fiat and Ford. It could be that this quarter's transfers aren't in this table.
- simonsarris 10y agoDirect link to the letter: http://files.shareholder.com/downloads/ABEA-4CW8X0/3100415019x0x913801/F9E5C36A-AFDD-4FF2-A375-ED9B0F912622/Q3_16_Update_Letter_-_final.pdf http://files.shareholder.com/downloads/ABEA-4CW8X0/310041501... > Total Q3 GAAP revenue was $2.30 billion, up 145% from Q3 2015, while total Q3 gross margin was 27.7%, compared to 21.6% in Q2. Total automotive revenue was $2.15 billion on a GAAP basis, up 152% from Q3 2015. Our final Q3 delivery count was 24,821,over 300 more than the estimated delivery count we shared on October 2nd. Deliveries increased 114% from the third quarter of 2015, and was comprised of 16,047 Model S and 8,774 Model X vehicles. In addition, 5,065 vehicles were in transit to customers at the end of the quarter. These vehicles will be delivered in Q4.
- vvanders 10y ago> We achieved record production levels in Q3, rising to 25,185 vehicles for an increase of 37% from Q2 and an increase of 92% from Q3 last year. An almost 100% production increase Year over Year, they said it couldn't be done and yet here we are.
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- jacquesm 10y agoCompare with Toyota's annual production of approximately 9 million vehicles for some perspective.
- RubberSpoon 10y agoCompare with Toyota's head start of approximately 66 years for some perspective.
- TylerE 10y agoThey're literally building them in an old Toyota plant, that at peak output was 426,000 vehicles annually.
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- toomuchtodo 10y agoSCTY acquisition is locked up. EDIT: Elon just said on the investor call "Our current plan requires no capital raise whatsoever for the Model 3 production. Solar City will be neutral to cash contributor in Q4.
- pilom 10y agoI'm not sure it does. All it shows is that Tesla, may at some point in the future be consistently profitable. It doesn't change anything about the prospects of SolarCity to be consistently profitable and if I were a Tesla owner that's what I'd want to see, getting more value than I put in.
- loceng 10y agoThe whole is greater than its parts. Tesla, to 'own' the ecosystem, needed to eventually offer what SolarCity has or there'd be a segment in their market they are catering to.
- pilom 10y agoI totally understand the argument for the merger, I'm just saying that this announcement of one profitable quarter (because they sold the ZEV credits) doesn't change anything about that merger math.
- greglindahl 10y agoTesla also generated cash, even if you subtract off ZEV credits. That's a big deal for a subset of investors, when a significant argument against the merger is that it's going to eat too much cash.
- vkou 10y agoBy that logic, what's really preventing Ford and Toyota from reaching true success is that they don't own any oil rigs. TSLA owning SCTY makes about as much sense as Toyota buying Exxon-Mobil, with a small helping of 'enormous conflict of interest.'
- rascalpenguin 10y agoI imagine this is because the majority of revenue is spent on growing the buisness, rather than going into profit (As profit = revenue - expenses). As Tesla still has a lot more space to grow. Same method Amazon did until recently for years.
- sova 10y agoExcellent! Thank you for pointing that out. "Profit" is a comical term, how can we measure the net savings for humanity-at-large from such endeavors?
- vinceguidry 10y agoI wouldn't exactly call it comical. It's just that it's a political term rather than a financial one. Deciding to take a profit this year is an important signifier for the investors, who all must have the same question in mind, how long is it going to take for their investment to pay off. As long as Musk decides to roll all revenues back into operations, investors get nothing. Musk has a reputation as someone who doesn't really care all that much about his investors, this is a move carefully designed to massage that image. Musk still doesn't care about his investors, but throwing a little cash their way keeps their voices from building to a crescendo. As for what humanity is getting out of the deal, they already got the Model S and X, it's soon going to get the 3.
- rascalpenguin 10y agoYeah that's right. Further, it's not that Musk just tells investors to go do one for humanity. They know if they let the business grow more now, they get even larger profits later.
- greglindahl 10y agoMost investors value growth as well as income. And that's especially the case for Tesla investors, who bought a stock that has a ton of growth already priced into it.
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- erikb 10y agoIt may even be a bad things if they have profits considering the kind of revolution they are attempting on the car industry. I hope though, that it means things went better for them than expected.
- pilom 10y agoProfits do not equal money returned to investors. These profits will be held for future capital purchases or used to pay down debt or used for R&D in the future.
- RivieraKid 10y agoRelated, at the beginning of Q3 Elon Musk sent email to employees urging to cut costs: > I thought it was important to write you a note directly to let you know how critical this quarter is, The third quarter will be our last chance to show investors that Tesla can be at least slightly positive cash flow and profitable before the Model 3 reaches full production.
- erikpukinskis 10y agoAlthough now he says (in the earnings call) there is a slight chance that Q4 will also be profitable.
- shasheene 10y agoThe Economist recently did a good article on the financing of Elon Musk's companies that flew under the radar of Hacker News that probably warranted further discussion [1] [2]. (Though the author of that piece completely misses the relative importance of each company to Musk, suggesting "he could try to sell [...] SpaceX, through gritted teeth, to a defence firm") It's unfortunate there's a bit of a reality distortion field around discussion Elon Musk's companies sometimes. Maybe because everyone wants his companies to succeed... [1] http://www.economist.com/news/business/21709061-entrepreneurs-finances-are-jaw-dropping-inventive-and-combustible-his-space?fsrc=scn/fb/te/pe/ed/countdown http://www.economist.com/news/business/21709061-entrepreneur... [2] http://www.economist.com/blogs/economist-explains/2016/10/economist-explains-21?fsrc=scn/fb/te/bl/ed/canelonmusksbusinessempiresurviveandthrive http://www.economist.com/blogs/economist-explains/2016/10/ec...
- patrickk 10y ago> Maybe because everyone wants his companies to succeed... Surely the only ones who don't want dramatically cheaper space launches, cheaper, widely available solar PV installations and attractive, affordable electric vehicles are deeply entrenched incumbents whose continued profitability involves polluting the planet, or those who really hate the environment for whatever reason. There are valid criticisms you can level at Musk (I wouldn't like to be a direct employee), but taking on the Wall Street quarter to quarter thinking with enormous, risky endeavours that have the potential to completely revolutionise some of the biggest industries out there (energy and transport) takes an extreme type of individual to succeed.
- mwfunk 10y agoI don't think that's the only reason someone might express skepticism of Musk at this point. They might want Musk to succeed at these things very, very much, but fear that his sketchier tendencies might lead to failure.
- karmelapple 10y agoI'm curious - what sketchier tendencies do you mean?
- mitchellh 10y agoReally great news! But something that shouldn't be overlooked is the discounts they gave in Q3 to push deliveries up. First, those that know me know that I am a Tesla FANATIC. My girlfriend once challenged me to not talk about Tesla (motors, energy, something) for a 24 hour period. I dunno if I've ever done that honestly. I'm also an owner (no surprise given my fanaticism, lucky to be able to afford one). And I also own some TSLA. Elon sent a company-wide email in Q3 to push sales to show profitability. I don't think its a fluke but they did something they never really do to help reach this number: they offered significant discounts on vehicles (new, pre-owned, showroom). Like, really big discounts (relative to the price of the car). That certainly helped. Elon also sent an email at the start of Q4 that NO MORE DISCOUNTS are allowed. So I'm really very interested to compare Q3 to Q4 when that comes. I also happen to know a lot of the people who bought a heavily discounted Tesla in Q3 feel kind of burned that right at the beginning of Q4 Tesla announced the new Autopilot hardware (that isn't retrotfitable on old vehicles). If you did your homework on Tesla though, this wasn't a surprise. It was expected that Tesla would make some big announcement to spur Q4 sales especially after Elon said there wouldn't be any capital raises in Q4 while he expected to hit Q4 numbers. You generally can't do that without some big news. Just wanted to color this news with that. I'm still very excited!
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- usaphp 10y ago> "I also happen to know a lot of the people who bought a heavily discounted Tesla in Q3 feel kind of burned that right at the beginning of Q4 Tesla announced the new Autopilot hardware (that isn't retrotfitable on old vehicles). " Wow I guess this is the best proof of how Tesla is really changing the way auto owners think, this is something that wasn't unthinkable before Tesla and their over the air updates. Can you imagine a BMW owner complaining that his 2015 model does not have stuff that new 2017 models will get??
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- phrygian 10y agoCan someone explain what this[0] means? It would seem that when you buy the car, you don't own it after all. [0] http://www.huffingtonpost.com/entry/tesla-self-driving-car-network-uber-lyft_us_5810cebfe4b001e247df8fe2 http://www.huffingtonpost.com/entry/tesla-self-driving-car-n...
- gubby 10y agoAt least in the UK, such a term would have to be brought to your attention before the sale, very clearly, for it to be part of the contract. Writing that in the manual would have no effect.
- greglindahl 10y agoInterestingly, in the UK paperback books have a little contract in the front saying you can't rebind them into hardbacks, while in the US such a contract is forbidden by the right of first sale. The moral is that these things are less obvious than one would think.
- TillE 10y agoThe UK certainly has some weird laws, but that sounds...of dubious validity. Like roughly the equivalent of "not for individual resale"; a contractual matter between the supplier and the merchant, not something that could even theoretically be enforced on any buyer.
- lmm 10y agoUK copyright law is old and unusually strict. E.g. crown copyright can be perpetual.
- gubby 10y agoI doubt strongly that this would have any effect either, for the same reason. My legal knowledge is a little old fashioned and sporadic, but the classic authority on this used to be 'Olley v Marlborough Court Hotel'. Worth a read, if only for the way Denning used to write his judgements.
- antimatter 10y agoOne thing to note, I have a few friends who work at Tesla service centers. They cut A LOT of corners when it comes to service to show profits this quarter. For example, for the location that one of my friends works at (which happens to be one of the busiest locations in Southern California), they sold almost every single loaner vehicle as a used car.
- greglindahl 10y agoWhile it's obvious that Tesla did whatever they could in Q3, it's worth noting that that's the strategy for loaner cars: they are supposed to be new, loaded cars, so that owners with a 2-3 year old car are tempted to upgrade. Given the new sensors, they need to update the loaner fleet.
- angstrom 10y agoRight, I don't think that's dishonest. These were vehicles essentially already paid for by Tesla in previous quarters. The fact that they could still sell them is a good sign.
- mikeash 10y agoI'm pretty sure they do that every quarter. It's pretty well known in the owner community that loaners might be hard to come by around the end of the quarter.
- yladiz 10y agoI'm impressed and skeptical of the substantial increase in production. A 70% increase in production in one year would likely require substantial changes in the production stages. Hopefully Tesla didn't cut any corners to hit this production number; I'm hopeful that they just scaled back their production initially and now show their "full potential", or added a lot of new machinery in their production line(s). Maybe they will reach the 500,000 target.
- mikeash 10y agoThey've been achieving production increases like that for years now. 70% YoY isn't anything special or remarkable for Tesla at this point.
- ams6110 10y agoWhen your production is low-volume, large percentage increases result from modest actual increases.
- jsight 10y agoI am pretty sure that the plant they are operating from (NUMMI) has a lot of potential for increase. I think that it peaked at over 400k units a year before Tesla bought it.
- nbarbettini 10y agoThey weren't scaling back their production before. They've just been aggressively expanding the plant - they built an entire new production line for Model X (IIRC), and have been adding a lot of automation. Not all quarters have been new records, but this one is.
- matchagaucho 10y agoCurious to understand how Model 3 deposits are reported in financials. Deferred revenue?
- ghaff 10y agoYes, I believe. As such it will be on the balance sheet but generally deferred revenue shouldn't have an impact on the income statement given accrual accounting. It will be recognized as revenue as the product is delivered. (It will affect the cash flow statement as well, of course.)
- annerajb 10y agoThere is a section that says customer deposits. I thought that's where the Model 3 Deposits and pending order deposits went.
- ghaff 10y agoLooks like it. So a deposit is received and it's recorded as cash (an asset) and customer deposits (a liability) on the balance sheet. And it doesn't affect the income statement. [ADDED: So customer deposits just a more specific name for revenue that can't be recognized as such yet.]
- justinzollars 10y agoGreat news! But not a surprise considering the great people who work there.
- 11thEarlOfMar 10y agoThe biggest news in this release is gross margin. Gross Margin Jumped from 26.7% in Q2 to 33.2% in Q3. For reference, MRQ, GM gross margin: 13.9% Toyota: 23.6% VW: 19.9% Granted, those are not luxury auto makers, but Tesla is more profitable on a gross margin basis. That margin fuels everything from cash flow to R&D spending. 33% for an automaker is huge.
- vvanders 10y agoYup, and as battery prices drop those margins are going to get even better(although I doubt we'll see the same level on the Model 3).
- ams6110 10y agoOnly if they can sustain prices as competition comes online from other makers.
- jsight 10y agoIt is going to take about 3 years for competition to reach where Tesla is right now with regards to range and charging networks.
- gniv 10y agoCharging networks maybe, but range no. The Chevy Bolt that will start selling in a couple of months has 238 miles range. GM doesn't have the superchargers, but they can afford to price these cars with zero profit for a while, if they want to undercut Tesla.
- nartsbtaa 10y agoBut who would drive a Chevy Bolt if they could drive a Tesla? Even if the Bolt is a better car, Tesla has the better brand name for now.
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- albertTJames 10y ago"Of 20 analysts covering the company, seven have a "sell" rating on the stock, four rate it "buy" or higher and nine have a "hold", according to Thomson Reuters data." === proof that something is very wrong with a world defined by speculators
- mehwoot 10y agoHow is a company with a market cap of $32 billion making a $20 million quarterly profit proof that something is wrong with people who think that company might be overvalued? Stock ratings are not about how a company is doing but about how a company is doing relative to its price.
- albertTJames 10y agoFair enough. Although, it was not a critic of how they are doing their job -which I am sure they do admirably- but on the nature of their metric and the inherent shortsightedness of their choices for mankind as a whole. An easy thought experiment would paint a very dark portrait of our future if the world was completely ruled by speculators: why would they favour risks and ideals? Why would they favour companies trying to change the status quo ? It takes courage, not planning and reason, to change the world for the best. It takes a strong philosophical stance to always keep looking at the horizon and have a measuring stick going above and beyond a comparison with more immediately viable solutions or even more profitable long term solutions. If the world was ruled by speculation, it would make more sense to promote fast food, dumb tv shows, fear, envy, and all sentiment inviting blind consumerism. Speculation has been a driving force for development in the past, now it is too dehumanised, algorithmically sound and too fast for any ideals to settle in.
- ww2 10y agostock price is about the sum of all future cash flow. not current profit level. you can have different forecasts, but you cannot say the act of making forecast itself is nonsense.
- whiskers08xmt 10y agoHow so?
- tschellenbach 10y agoI've been reading the book about Elon Musk, great read. This is all the more impressive considering all the stories of times they almost went bankrupt.
- ams6110 10y agoAmost (or actually) going bankrupt is normal (or at least, not unusual) for entrepreneurs.
- johnnydoe9 10y agoThe Ashlee Vance book? It's been on my to-read list for a while
- q-base 10y agoWould like to know which one. Would like to read a book about him but just not sure whether any of the currents are any good or just put out there to ride on his current fame.
- dwills 10y agoAnother take on the Tesla financial story: http://www.zerohedge.com/news/2016-10-26/tesla-earnings-smash-expectations-after-dramatic-change-reporting-methodology http://www.zerohedge.com/news/2016-10-26/tesla-earnings-smas...
- ryanmarsh 10y agoWhy would they do that? Why post profits?
- mikeash 10y agoTo show that they can. Many are (were?) skeptical that Tesla could ever make money, even with healthy sales. The intent here is to increase investor confidence by proving that wrong.
- sien 10y agoNovember 17 vote to approve Solar City purchase. Solar City has Musk's cousins with stakes worth millions. http://www.bloomberg.com/news/articles/2016-10-26/the-goldman-way-to-fire-bit-by-bit-hundreds-are-given-heave-ho http://www.bloomberg.com/news/articles/2016-10-26/the-goldma... https://www.bigw.com.au/product/fisher-price-keyboard-mat/p/WCC100000000209539/ https://www.bigw.com.au/product/fisher-price-keyboard-mat/p/...
- mortdeus 10y agoElon Musk works too hard to fail.
- tn13 10y agoGood for Tesla. It now only needs to reduce its dependency on government dole to kill the rest of the auto industry.
- aerovistae 10y agoWhat are you talking about?
- tn13 10y agosubsidies per car.