Tesla riding high with sales, profitability

FOR the first time in its 17-year history, EV powerhouse Tesla Motors has reported a profit for four consecutive quarters that defied analysts’ expectations and now vindicates the potential profitability of electric vehicles.

Tesla chief executive Elon Musk announced last week a $US104 million ($A146m) profit for the three months to June 30 that was recorded despite factory shutdowns because of the coronavirus pandemic.

It comes after a $US16 million ($A22.4m) profit in the first quarter, $US143m ($A200m) in Q3 2019 and $US105m ($A147m) in Q4 2019.

Tesla’s solar roof and battery storage businesses contributed $US349 million ($A490m) to the group’s $US6.0 billion ($A8.5b) revenue for the quarter.

The company has also now confirmed its Cybertruck will be built at a new factory in Austin, Texas, after the state committed $US65 million ($A91m) in tax breaks for Tesla for 10 years.

After the quarterly profit announcement, Tesla shares jumped to $US1677.78 ($A2278) each. This compares with the price of $US259 ($A364) a share one year ago. The shares have now settled back to around $US1417 ($A1990).

Tesla could now be eligible for inclusion in the US stock market’s S&P 500 index, meaning it will be included in the inventory of indexed funds favoured by large institutions.

Because the S&P is in demand by larger investors, analysts believe it would further accelerate Tesla’s share price.

Analysts said that part of the quarterly profit was attributed to its position in China.

Increasing sales in China were driven by higher price margins because of the lower manufacturing costs of its Shanghai plant and increased revenue from software developments.

The company delivered almost 91,000 vehicles in the three months, down about five per cent on the same period in 2019.

It is now producing from its Californian and Shanghai plants, and is planning a third factory for battery production in Germany and reportedly looking at a second plant in Chongqing in south-west China.

Tesla plans to employ 5000 workers at the new Texas plant, which as well as the EV pick-up will produce the Model 3, Model Y and forthcoming Semi truck.

In Austin, Tesla will join hi-tech companies including IBM, Dell and 3M who made it home mainly because Texas has no state income tax for residents.

Tesla chief executive Elon Musk said he had “never been more excited and optimistic about the future of Tesla in the history of the company”.

Tesla last month past Toyota as the world's most valuable car-maker, with a market worth almost $US300 billion ($A420b) despite Toyota sales being almost 30 times that of Tesla.

A Tesla statement said the company was expecting production in the 2020 calendar year to exceed 500,000 vehicles.

“We have the capacity installed to exceed 500,000 vehicle deliveries this year, despite recent production interruptions,” it said.

“While achieving this goal has become more difficult, delivering half a million vehicles in 2020 remains our target.”