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Tesla Reports is Highest Quarterly Profit Ever, Predicts the Model Y Could Become the World's Best Selling Vehicle of Any Kind

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【Summary】As competition heats up in the electric vehicle space, pioneer Tesla proved that it’s still the undisputed leader in the auto industry. On Monday, Tesla reported its highest quarterly profit ever with a GAAP net income of $438 million. Tesla’s non-GAAP net income surpassed $1 billion for the first time in its history due to brisk sales of the Model 3 and Model Y.

Eric Walz    Apr 27, 2021 12:15 PM PT
Tesla Reports is Highest Quarterly Profit Ever, Predicts the Model Y Could Become the World's Best Selling Vehicle of Any Kind
Tesla believes that the Model Y could become the world's best selling vehicle, gas or electric.

As competition heats up in the electric vehicle space, pioneer Tesla proved that it's still the undisputed leader in the auto industry. On Monday, Tesla reported its highest quarterly profit ever with a GAAP net income of $438 million. The strong Q1 performance resulted in earnings of 93 cents per share on $10.39 billion in revenue.

Tesla's net income attributable to common stockholders (GAAP) in Q1 represents a year-on-year increase of 2638%, which further cements Tesla's place as the world's most valuable automaker. Total revenue grew 74% YoY in Q1.   Additionally, Tesla's non-GAAP net income surpassed $1 billion for the first time in its history. 

Tesla's strong Q1 can be attributed to brisk sales of the Model 3 and Model Y.

Earlier this month, Tesla announced it delivered a record 184,800 cars in the first three months of 2021, which is more than double the total from the same period in 2020. Demand for Tesla's vehicles remained high throughout 2020 and that momentum has continued in the new year.

Tesla said that the Model 3 is the best-selling premium sedan in the world, outselling the BMW 3 Series and Mercedes Benz E Class. But its Tesla's Model Y crossover that could become its best selling vehicle worldwide. 

Chief Executive Elon Musk said in the past that the Model Y could outsell all of Tesla's other models combined. The company wrote in its Q1 financial summary that it believes the Model Y could become a category leader and the best-selling vehicle of any kind globally.

"There's a lot to be excited about in 2021 and 2022," Chief Executive Elon Musk said on the conference call with analysts on Monday.

Tesla's strong quarterly profits did not include the Model S sedan or Model X SUV. Tesla is in the process of refreshing the two aging models and so far did not produce either of the two vehicles this year. Although Tesla's did not produce any new Model S sedans or Model X SUVs in Q1, the company reported that it sold 2,030 of them combined.

Tesla said that the first refreshed Model S will be available shortly, but the company website shows a delivery window of late August or September. 

Tesla said its moving quickly to ramp up production of the mass market Model 3 and Model Y. The company's factory in Fremont California has the capacity to produce 500,000 Model 3 and Model Y vehicles each year, which is enough to meet demand. Tesla said the factory is nearing full production capacity.

At Tesla's factory in Shanghai, the company continues to ramp up production as well. Tesla said its factory in China can produce 450,000 vehicles annually. Tesla expects that its Shanghai factory will continue to increase quarterly production output through the rest of the year. 

To support Tesla's production ramp up in China, the company is sourcing more parts locally instead of importing time into China. Tesla said it improved its domestic supply sourcing ratio in China to over 90%. 

Tesla also announced that work on new factories in Berlin and Taxas is progressing on schedule. Production and deliveries of vehicles built in Germany is expected to begin in late 2021.

The company began moving equipment into its Texas gigafactory and is in the process of commissioning them in certain areas. Once online, the factory will produce the Model Y then eventually the futuristic Cybertruck. Tesla also said that the first electric semi trucks will be delivered by the end of 2021.

Tesla's strong first quarter was in spite of the multiple challenges for the auto industry as a whole last year, including supply chain instability as a result of the global pandemic. Like other automakers, Tesla also had to deal with a global chip shortage that has forced many of the world's automakers to temporarily suspend production of popular models. 

Musk said the chips shortage is "one of the most difficult supply-chain challenges we've experienced." But he added that the company was able to switch to chips that were easier to acquire.

As Tesla builds more vehicles each year, the cost to produce each vehicle is declining due to economies of scale, which helps the company boost its profit margins. Tesla said the average cost to produce each vehicle across its fleet was roughly $84,000. However, due to the launch of new products and new factories and the reduced mix of Model S and Model X vehicles, its average cost declined to below $38,000 per vehicle in Q1.

Tesla expects its operating margin will continue to grow over time to industry-leading levels.

Tesla also shared its planned battery and powertrain updates which will help the company increase the range of its vehicles. Although range has increased significantly over the years, Tesla said it will continue to increase due to improvements in battery cell chemistry, architecture, powertrain efficiency and new thermal systems.

Tesla's Long Range Model 3 has an EPA estimated range of 353 miles. The Model Y offers a 326-mile range. Tesla believes that increasing range is a priority for getting more people to switch from an internal combustion engine vehicle to an EV.

Despite Tesla's strong Q1 financial results, its shares, they are down around 4% on Tuesday to $709.

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