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They also make much of their profits from selling emission credits to other car manufacturers: https://www.cnbc.com/2020/07/23/teslas-sale-of-environmental-cre

• jfk13 5y ago
  "Much" may even be an understatement here; according to the WSJ article, > sales of regulatory credits to other auto makers to help them meet emissions mandates, which carry a 100% profit margin, reached $518 million. That accounts for nearly 100% of Tesla’s $533 million in pretax income it sounds like "almost all" would be a reasonable description.
  • bryanlarsen 5y ago
    Tesla had a 24% gross margin in Q1. They made a massive amount of money selling cars. They also had a massive amount of R&D and capital expenditures. The emissions credits required R&D and capital expenditures in prior years so you can't say that the R&D and capital expenditures should only be charged against vehicle sales and not emissions credits.
    • carlivar 5y ago
      Agreed, but you CAN say that the business of selling cars is a long term endeavor and the regulatory credits are transient. Invest accordingly.
      • bryanlarsen 5y ago
        Tesla's Q1 also included a massive number of transient expenses (like Musk's stock options) that were significantly larger than transient income like emission credits.
    • deleted 5y ago
      [deleted]
  • hwillis 5y ago
    They also spent $1,491 million on R&D. "Much" is more correct than "almost all", which implies that profit is just the leftovers once expenses are subtracted. Profit and expenses are choices; the fact that a firm puts all its revenue into SSG&A and R&D does not mean that they can't be profitable. If Tesla's revenue decreased by $533 million, they would probably still target $300-400 million in profit by adjusting their spending. They would do that because even at a lower revenue it still benefits them to report profit, and that benefit is still there even if they spend less on other things. If a $533 million decrease would not lead to $0 profit, then it doesn't make sense to say that their profit comes from credits. It only makes sense to say that 7% of their revenue comes from credits, and that a significant (but not all, and probably less than half) part of their profit comes from credits.
• finolex1 5y ago
  If we accept that emission credits are intrinsically valuable (i.e. have some utility in the form of helping to reduce the adverse effects of Global Warming), I do not see why that is an issue. You can think of a portion of each credit as part of the utility of one actual Tesla car sold.
  • papercrane 5y ago
    Only an issue if you're an investor. The expectation is eventually that revenue stream will dry up. The question is if Tesla will be able to build it's other revenue streams up to replace it.
    • falcolas 5y ago
      It's also somewhat volatile, as there aren't guaranteed purchasers for the credits. Recently, one of the biggest purchasers from Tesla (Stellantis) announced that it would stop buying credits entirely.
      • nickik 5y ago
        Yes one of the other companies would could have sold credits, is now no longer in the market making there be less credits on the market. Crazy how that works.
    • klmadfejno 5y ago
      What if you're an investor who lives on Earth?
      • papercrane 5y ago
        Then you'll be worried about Tesla losing a revenue stream, and happy that they're losing it because other companies are transitioning to EVs.
        • klmadfejno 5y ago
• bhauer 5y ago
  Someone made a useful graphic breakdown of the revenue, costs, and profit numbers from Tesla's Q1 2021 earnings report: https://pbs.twimg.com/media/E0ES_LuX0AED-eo?format=png&name=small https://pbs.twimg.com/media/E0ES_LuX0AED-eo?format=png&name=... It's worth a review if you think the emission credits point is a substantial criticism of their business model. Also, bear in mind that they are a growth company, and are building two major factories concurrently (Austin, Berlin). If they didn't have emission credits as part of the revenue blend, they might slow down the growth a bit as a result. The point being that taking away emission credits would not necessarily mean they would elect to be not profitable.
  • igorkraw 5y ago
    To me this reads like minus credits and bitcoin, they'd have to scale down R&D in order to break event which would probably push back FSD and delivering on all of their pre-ordered promises again? Which I would assume increases the risk of people canceling and registering as negative revenue? How "normal" is their cost of revenue and sales/admin/overhead in the car industry?
    • hwillis 5y ago
      on the higher end: https://lga-consultants.com/seven-global-car-makers-kpis-part-3-profitability/ https://lga-consultants.com/seven-global-car-makers-kpis-par... but nothing absurd. Note that trying to compare 2020 data will obviously be extremely wonky.
    • mft_ 5y ago
      Unless I'm reading that graphic incorrectly, isn't it only a $24m delta? i.e. credits + bitcoin profits are only $24m greater than their operating profit? On the scale of Tesla, that feels like a tiny amount - for which they'd dip into their war-chest and not slow anything down at all?
  • hwillis 5y ago
    seems a little goofy to put credits at the top and not in order of size like the rest of the chart, but that's my only criticism. It does a good job illustrating that the fact that profit ~= credits is largely coincidental