Tesla delivers its fifth straight quarterly profit

Tesla delivered a fifth straight quarterly profit in the three months to the end of September, as the electric vehicle maker aims to deliver a record-breaking 500,000 cars in 2020.

The company led by Elon Musk described its results as “a record quarter on many levels”, with revenues jumping 39 per cent from a year ago to $8.77bn, beating analyst estimates of $8.3bn. Net profit rose 131 per cent to $331m.

The sale of regulatory credits — in which Tesla sells zero-emission credits from various governments to other carmakers — accounted for $397m in revenue, buoying its top line. In the prior quarter, $428m in revenue from such credits were the primary reason it ended up in the black in spite of widespread expectations for a loss.

The Fremont, California-based company also said gross margins rose 4.62 percentage points from a year ago to 23.5 per cent, ahead of estimates of 19.75 per cent. It recorded $579m from energy storage sales — up 44 per cent from a year ago — while services revenue grew 6 per cent to $581m.

Tesla stock gained 2.5 per cent in after-hours trading on Wednesday.

“The market was expecting substantial growth in earnings per share and free cash flow and Tesla has delivered on both,” said Nicholas Hyett, analyst at Hargreaves Lansdown, referring to Tesla’s free cash flow of $1.4bn.

Tesla said it intended to implement “more ambitious architectural changes” to both its products and factories, in a bid to “improve manufacturing cost and efficiency”.

“We are also expanding our scope of manufacturing to include additional areas of insourcing,” Tesla said, referring to plans announced last month to make battery cells in-house.

Tesla’s stock price had a wild ride during the quarter running from July to September. On July 1, it overtook Toyota by market value to become the world’s most valuable carmaker at $205bn, baffling many analysts given that the Japanese group builds 20 times as many vehicles per year. By the end of August, its share price had again more than doubled to give it a valuation of $465bn. By quarter-end, it had fallen again to $400bn — up 452 per cent up from the start of the year.

Tesla had already reported third quarter vehicle deliveries of 138,300, a company record that marked a gain of 43 per cent from the previous year and was slightly ahead of estimates. The vast bulk of vehicles were its less expensive Model Y and Model 3, as the premium Model S and X accounted for just 15,200 of the total.

Alyssa Altman at Publicis Sapient said the 44 per cent leap in energy storage sales — which include the sale of battery power packs for the home that connect to solar panels — offered hope to investors that Mr Musk could deliver on his long-term ambition for Tesla to be a leader in several markets beyond just vehicles.

“Everyone knows Tesla as an electric car company, but they are going to continue to build products around energy,” she said. 

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