Tesla Earning Result 3Q 2020 [pdf]

Rule of 40 of 318 is outstanding and only Zoom has a greater number than Tesla (42% YoY rev + 276% in Free Cash Flow YoY

Beauty To Behold

;)

In the last quarterly update Elon said that his goal was to have a profit margin of 1-2% with the rest going to R&D and expansion. So as long as carbon credit sales are more than 2% of revenue, we'll hear the same complaint.

Surely they won't repeat a payment like that every quarter from now on.

And of course, running the biggest growth business on Earth at a significant profit probably isn't the wisest decision.

They made money doing a thing, and subsequently got to sell their product at a lower cost just as any competitors are able to do.

People keep saying this like it’s some kind of cheating.

I take this as a good sign. The carbon credits will slowly reduce as other auto manufacturers introduce more electric vehicles, as long as Tesla's growth out paces that reduction. Based on current numbers, they reduced carbon credit sales by 8% while increasing automobile sales revenue by 45% (can somebody check my numbers).

For the long game, that seems fine to me. Good in fact.

And because of the amazing stock growth a huge amount of stock options had to be payed. This was a p eak payment and will go down again next quarter.

A 20%+ margin on automotive without credits is quite fantastic actually, and that really is the core buissness people should be paying attention to. What you mention as 'core buissness' includes building multiple new factories at the same time, its not really comparable with other companies in this buissness.

With Q4 we are looking at a further increase in overall sales, only slightly growing operational spending, and a drop in SGA. Q4 will finally stop the 'its only credits' storyline.

That said, even years after people said credits will soon be over, the reality is that they are gone continue to increase as Tesla delivers more vehicles they actually get more credits, even when the value per credit goes down. We have been hearing the 'credit end next year' story so often that its almost a meme now. With auto makers continuing to go into SUV and Europe, China and California making pushing up requirements, there is little indication that every car maker will always manage to balance their fleet.

> meaning their core business still loses money

Wrong. Even a cursory look at their earnings report would have told you so. They made 23% gross margin on automotive revenue excluding credits. How is making 23% gross margin "losing money"? The typical automaker makes single digit gross margins on their products.

And they did all this while building out factories on three continents.

$331M GAAP - $397M credit sales + $280M Musk non-recurring non-cash option award => $214M core business profit.

Apparently some papers came out late last year that have laid the foundation for much better approaches.

(I honestly don’t get your point?)

The Prius is a miserable little piece of shit for people who hate driving. The Model 3 is a superior driving experience to pretty much every other midsize sedan on the market, including BMW, Mercedes, etc.

The fact that it's "green" is just a bonus for me. I love the convenience of charging at home and never stopping for gas, the smoothness, the quiet, the linearity and directness of the power delivery, the clean and minimalist interior, and the precise and responsive handling.

The reason no other electric car is yet selling in volume the US is that Tesla has for a long time been the only one that doesn't suck. The Porsche Taycan is the first credible competitor, and I understand Porsche is already selling more of those than they do 911s.

Where do you see that conclusion, numbers from the wikipedia page:

300k Tesla 3

150K Tesla S

150k Volt

140k Leaf

110k Prius Electric

85k Tesla X

200k Other non-Tesla

Tesla is the largest single electric car seller but it's not even a majority of electric cars sold.

EDIT: Burning electric vehicles are much harder to put down than, say gas cars, because, for one they don't need external source of oxygen, and second, there's much more of fuel to burn: 1200 lbs of batteries in a Tesla vs 10 gallons (85 lbs) of gas in the tank of an average car. Electric cars will probably be banned from underground parkings, sooner or later.

And saying that gas cars are "destroying the planet" is just ridiculous - they are maybe 5% of total CO2 emissions. And electric cars are actually responsible for even more emissions - not from burning fuel, obviously, but just manufacturing it releases more carbon dioxide than an average gas-powered car will in its 25 years lifecycle.

US is the market where ICE has the longest runway and car makers try to make profit from their ICE as long as they can.

While other companies made electric cars over the last few years, they were compliance vehicles that were not intended to have mass market appeal. For example, until recently these vehicles have looked aggressively different vs the conservative, simple designs of the Model S or 3.

Even today, directly competing vehicles tend to have worse price, range, or features (especially in the automation space).

If battery price reductions continue, price parity will eventually come in North America even without subsidies, so we should see a similar explosion here.

However, I didn't see many outside the liberal left coast crowd virtue signaling with their hybrids.

But that's not the case with Tesla. Of the Tesla owners I know, the majority also own companies and environmentally agnostic.

The only Prius owner I know personally was fresh out of college working an entry level sales job.

Oh, and as for the driving experience of a Tesla, performance models are quite literally quicker than many roller coasters. You might try driving a performance Model S sometime to experience the surprise first hand.

I assume you haven't, because very few Tesla skeptics have.

The fact that one electric car manufacturer has been successful means that the infrastructure and support for electric cars gets built out. This takes away the largest entrenched advantage that gas powered cars have. The first mover in electric cars has to push against the enormous headwind of charging stations/battery costs/regulations/repair services etc... The fact that Tesla succeeded despite this, shows me that the bend of the hockey stick is fast approaching.

You are correct that there is only a limited pool of 'status buyers', and that most cars are bought by people who just want an appliance. However the status buyers only need to carry things far enough for battery prices to fall, and charging stations to become normalized. Once that happens it is easy to see the best option for 'John Smith business commuter' is an electric car. However, those buyers won't pay for a premium nameplate.

Even without any cell technology innovation, scale alone is getting us to initial cost parity (and obviously lower TCoO). But the cell technology is coming. Roadrunner alone demonstrates that. The real question is about electric aircraft that would depend on solid state, lithium-air, etc.

I think the driving force behind EVs long term (decades) will be power companies trying to balance the grid between peak and non-peak loads. What better way to install massive amounts of expensive storage than to put their finger on the scale to incentivize their existing customers to pay for it themselves, all without hurting profits? The big thorn is that the infrastructure to support that is pretty much nonexistent, but there are plenty of steps in between such as smart chargers that only charge the car when signaled to. In California alone, there is potential to sell hundreds of thousands of electric vehicles that can provide backup power during the ridiculous number of blackouts we've had and will continue to have for the foreseeable future as the utilities upgrade their innumerable fire starters (utility poles).

Unlike Europe's highly integrated grids, the ones in the US don't have a network of aluminum smelters, pumped storage, and other industries set up to take advantage of variable power pricing with high enough density. As the variability between peak power production and baseline consumption throughout the day increases, I predict we'll see other more stealthy market incentives push people towards electric cars.

A lot of work to make the electricity grid clean but no need to move the goal post.

That's not a very up-to-date view. If you go to a car dealer and look at new cars, most of them are hybrid now in some shape. Even the Corolla is now a hybrid car.

Sure, it's not about signalling green hipness anymore. For hybrids it's just economics. You fill your tank half as often, that's it. Not sexy, but wallet.

It will be similar with electric. Once you just conveniently charge at home, you don't need this periodic stop at a gas station anymore. And people will go on with their lives, eventually accepting it as the new norm, without thinking about it.

It is for the "learning organization". If Musk is able to continue a generative culture within Tesla more data will equal a more robust system. If Tesla changes to a "rule/process" or "power" based culture, your concern will come true.

Of course, however I imagine that the self-driving feature space is so large and so hard to collect that they probably do have lots of room for improvement simply with more data.

When I went to the various lots in my city, each was very busy and the salesmen were talking a lot about how crazy business had been. It could just be my city, but maybe sales haven’t slowed at all.