September 28, 2021
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Tesla Extends Profit Streak On Strong Q1 Sales Of Electric Car–And Pollution Credits

Tesla stayed profitable in the first quarter, posting earnings and revenue figures that topped consensus expectations, helped by the electric-car maker’s robust first-quarter vehicle deliveries and sales of pollution credits to other automakers. The company also said it’s targeting annual growth in deliveries of 50% a year.

The Palo Alto, California-based company led by billionaire Elon Musk reported net income of $438 million for the quarter that ended in March, with 39 cents of earnings per share on a GAAP basis, and 93 cents per share, excluding some items, beating a consensus estimate of 79 cents a share. Revenue was $10.4 billion, just ahead of equity analysts’ expectations of sales totalling about $10.3 billion. 

Sales of regulatory credits to manufacturers of gasoline-powered cars and trucks rose to $518 million, the company said. That was the most ever for a single quarter. Those funds, which are pure profit for Tesla and nearly impossible for analysts to accurately estimate, have underpinned the company’s profitable streak that’s lasted more than a year after a decade of losses.

The results were a “strong print for Musk & Co.” even though “total revenues were slightly below bullish expectations,” Dan Ives, an equity analyst for Wedbush, said in a research note. “In a nutshell, we believe the (gross margin) performance was a standout relative to Street fears heading into the print,” as the company reported a GAAP growth margin of 21.3% compared with consensus estimates of 21%.

Tesla’s extended streak of profitability comes as it races to expand production in China, open its first auto-production facility in Germany and complete construction of a Gigafactory near Austin, Texas. At the same time, Musk’s company is about to face vastly more competition in every product category as companies including Volkswagen, General Motors, Ford, Hyundai, Nissan and startups such as Lucid and Rivian ramp up or launch sales of their own battery-powered cars and trucks. A push by the Biden Administration to dramatically expand sales and production of electric vehicles in the U.S. means Tesla will have to work even harder to retain its lead in that space. 

The shares gained 1.2% to close at $738.20 in Nasdaq trading Monday, prior to the results release. They were down 2% in after-hours activity to $723.47.

The quarter marked “our highest ever vehicle production and deliveries. This was in spite of multiple challenges, including seasonality, supply chain instability and the transition to the new Model S and Model X,” the company said in a statement. “While the (average sales price) of our vehicles declined in Q1, our auto gross margin increased sequentially, as our costs decreased even faster. Reducing the average cost of the vehicles we produce is essential to our mission.”

Tesla earlier this month reported deliveries of 184,800 vehicles to customers worldwide in January through March, more than double the year-earlier figure when the outbreak of Covid-19 briefly halted production at its plants in California and Shanghai. Still, the sequential increase from 2020’s fourth quarter was just 2.2%.

(Updates to follow from company conference call.)