Tesla posts profit, picks factory site
Tesla overcame a sevenweek pandemicrelated shutdown at its Fremont assembly plant to post a surprising $104 million net profit for the second quarter.
It was the company’s fourth consecutive positive quarter, qualifying it to be included in the S&P 500 index of corporate titans. A decision on that will be made later.
Alameda County restrictions forced the electriccar and solarpanel maker to close its only U.S. assembly factory in Fremont from March 23 to May 11. The company paid roughly 10,000 workers for part of the shutdown and continued health care and other benefits.
Excluding onetime items, such as $347 million in stockbased compensation, Tesla made $2.18 per share. That beat Wall Street estimates of a breakeven quarter. Revenue was down 4.9% from the same quarter a year ago to $6.04 billion. That still beat Wall Street estimates of $5.15 billion.
The company said its progress in the first half of the year has positioned it for success in the second half as production output continues to improve.
Telsa also said it has picked the Austin, Texas, area as the site for its second U.S. assembly plant. Austin was the front runner, but Tulsa, Okla., was a possibility.
The new factory will build Tesla’s Cybertruck pickup and will be a second U.S. manufacturing site for the Model Y small SUV, largely for distribution to the East Coast.
Tesla will build on a 2,100acre site in Travis County near Austin and will get more than $60 million in tax breaks over the next decade. Work on the plant, which will be over 4 million square feet and employ 5,000 workers, is already under way, Tesla CEO Elon Musk said.
Shares in the Palo Alto company were up more than 1.5% Wednesday to close at $1,592. The surprising profit, compared with a $408 million secondquarter loss a year ago, pushed Tesla stock up more than 4.5% to $1,665.45 in afterhours trading.
Tesla would have lost money, though, without $428 million it earned from selling electricvehicle credits to other automakers so they can meet government fuel economy and pollution regulations.
The company said its profit increased over the first quarter’s tiny $16 million because of “fundamental operational improvements.”
But it issued a note of caution in its investor letter released Wednesday after the markets closed: “It remains difficult to predict whether there will be further operational interruptions or how global consumer sentiment will evolve in the second half of 2020.”
Tesla said it should have enough money to fund new products and to build new factories in the U.S. and Germany, as well as cover other expenses. The company said it would begin delivering its electric semi next year.
Tesla generated $964 million in cash from its operations from April through June, and it ended the quarter with about $9.1 billion in cash. But it also had $8.5 billion in debts, according to financial statements.
Musk had pledged to build more than 500,000 vehicles this year, but the company said the Fremont factory shutdown has made that goal more difficult. Still, the company has a target of delivering more than a halfmillion vehicles this year, and is installing equipment to increase Fremont’s output, the letter said.
Tesla’s secondquarter profit came after it announced betterthanexpected global sales during the period. The company said it delivered 90,650 vehicles from April through June as it rolled out the new Model Y SUV in the United States and China. That’s a 2.5% increase over the first quarter’s 88,400. But it was a 4.8% drop from the second quarter of 2019, when Tesla delivered 95,200 vehicles.
The secondquarter sales came with a feverish push in June to crank out and sell more vehicles in the United States. But the push was accompanied by numerous quality problems reported on Tesla owner forums and social media.