Rivals are charging to catch up with Tesla
TESLA’S third quarter results continued a recent run of very strong results.
Revenue rose 57 per cent to $13.8billion, better than investors had expected, as car sales hit 241,391 in three months.
However, a shift in popularity from higher-priced Model S/Xs to lowerpriced Model 3/Ys meant average revenue per vehicle fell year-on-year.
Despite that, operating profit more than doubled to $2billion. That’s down to Tesla’s huge uplift in production.
More cars rattling through lowers per-unit costs, so margins and profits can come for the ride. But Tesla has more work to do. Its 500,000 cars in 2020 pales in comparison to VW’s 5.3 million, 212,000 of which were electric. Despite a global chip shortage and port disruption, Tesla’s factories are now steadily approaching full capacity. The first European Model Ys and a new plant in Texas are imminent.
Progress and new capacity is all the more welcome as the group saw a substantial decline in its regulatory credit sales in the third quarter. Tesla earns credits for its zero-emission vehicles and sells them to other manufacturers who need to offset their emissions. These credits have been a valuable source of cash. But as rivals build more electric vehicles of their own the credits have become less valuable.
A few years ago this would have been catastrophic, but it’s testament to how far the group’s come that it can now shrug off the credit decline with ease.
However, for all that our core problem with Tesla remains unchanged. The group is valued at $857.2bn, or 122.4 times profits, making it the world’s most valuable automotive company by far.
That valuation depends on massive growth. But rivals are pouring billions into closing the technological gap, and competition in China is already hotting up. Seizing the necessary share of the electric vehicle market is a big ask.
Tesla has enjoyed technological superiority, with a great brand and investment story. But as the valuation has risen, so have expectations. Meeting those will be no easy feat.
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