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Comment by enimodas | Hacker News Reader

How do significant discounts create more profitability? Isn't that like "we lose money on every sale, but make it up in volume."?

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It may move volume up enough for a brief period to display profitability, but the catch is that if the quarter following it does not have a very special attraction of its own that you will likely see the quarter after it substantially lower. Essentially it moves sales from the next quarter to the current one.

Tesla likely reasoned that they would have a huge up in Q4 and instead of having one quarter with profitability (Q4) they could spread it out and show two consecutive profitable quarters with even higher profits in Q4.

This may indicate they will be attempting to raise more money early next year, it's the kind of 'good news' that investors like to see.

Per-unit margin goes down (but is still profitable per unit) but you make up in volume to create a profit.

Tesla's main costs aren't the cost per unit but the engineer/software costs iirc.

If they make more profit by selling more units at a lower price... then why don't they always just do that?

They don't make more profit per vehicle, they just made more profit in a short window of time by doing more sales but this may not be sustainable because it just shifts sales around rather in time at a lower profit per vehicle.

Building lots of cars is hard. It takes a lot of time and money to ramp up production capacity to this level. They've been building cars as fast as they could for years now.

Production bottlenecks.

Tesla is constantly behind on producing cars for its customers. They just wanted to generate money now rather than later.

@cortesoft - It takes a lot of time and infrastructure investment to ramp up production to those sort of levels.

This has actually been Tesla's business plan all along: start with a low volume, high-priced product (the Roadster) and gradually move towards successively higher volume, lower cost models.

As per the earnings call, the profit per unit actually went up, and the discounts were never sanctioned and also not relevant to this end result.

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