Tesla (TSLA. O), which has been "abandoned" by the market for four consecutive financial reports, faces "growth troubles", and urgently needs to prove itself with financial reports, finally submitted a satisfactory third quarter report to Wall Street on October 23 Eastern Time.
The financial report for the third quarter of 2024 shows that the company achieved a revenue of 25.182 billion US dollars, a year-on-year increase of 8%, slightly lower than the market expectation of 25.37 billion US dollars; The net profit was approximately 2.167 billion US dollars, a year-on-year increase of 17%, and the EPS per share increased to 0.62 US dollars, higher than most institutions expected.
Behind this, Tesla's overall gross profit margin of 19.8% in the third quarter (3 percentage points higher than expected), including an operating profit margin that increased by more than 3 percentage points year-on-year to 10.8%, is impressive. And the high gross profit margin is not only caused by the decrease in vehicle costs, but also by the return of Cybertruck profits, significant growth in energy storage gross profit margins, and large-scale sales of carbon credits.
After the disclosure of the third quarter financial report, Tesla's after hours trading was sluggish, and its stock price rose by more than 12% at one point.
Analysts believe that due to four consecutive quarters of lower than expected net profit and the vague language about robots and autonomous taxis at the "We, Robot" press conference, the market still held a relatively pessimistic attitude towards Tesla before the release of its third quarter financial report, which actually led to Tesla's third quarter report breaking many people's expectations.
Get rid of the profit margin swamp
Tesla's relatively sluggish performance has actually been going on for some time - due to the increasing uncertainty in the global economic environment and the "pursuit and blockade" of electric vehicle competitors from China, Tesla's gross profit margin for electric vehicles has declined in the past two years.
Data shows that in the first quarter of 2022, Tesla's electric vehicle sales achieved a gross profit margin of 30.0% per vehicle, excluding carbon credits. But thereafter, the gross profit margin continued to decline, dropping to 14.6% in the second quarter of 2024. During this period, only in the third quarter of 2022 and the fourth quarter of 2023 did Tesla's electric vehicle's gross profit margin increase slightly, but the proportion was less than 1%.
The increase in gross profit this time comes from Tesla's "cost control" effect. According to the company's disclosure, Tesla's cost of bike sales (COGS) dropped to a historic low of approximately $35100 in the third quarter.
Regarding the continuously decreasing cost of car manufacturing, multiple analysts told 21st Century Business Herald reporters that the Chinese market is currently the main market driving Tesla's electric vehicle sales growth, but at the same time, the Chinese market is also the market with the lowest gross profit margin for Tesla's electric vehicles. On the other hand, the cost of lithium batteries has decreased significantly this year, so the business in the Chinese market can make Tesla's financial report numbers "flexible".
A person close to Tesla told reporters that the improvement in production processes and efficiency at Tesla's Shanghai Gigafactory this year is also the main reason for the continuous decline in the cost of Tesla electric vehicles.
Meanwhile, Tesla has also disclosed more cost control measures. For example, in the third quarter, the company quickly achieved a return to single bike profit margins with the release of its one-year Cybertruck.
For example, due to better optimization of carbon credits compared to other global OEM manufacturers, Tesla sold $739 million in carbon credits in the third quarter.
The progress of energy storage business has exceeded expectations. According to the financial report, Tesla's installed capacity of energy storage products reached 6.9 gigawatt hours in the third quarter, a year-on-year increase of up to 73%; In the first three quarters of this year, the cumulative installed capacity soared to 20.4 gigawatt hours and achieved a record breaking gross profit margin of 30.5%, an increase of nearly 6 percentage points compared to the previous quarter.
According to the reporter's understanding, Tesla's Shanghai Gigafactory will start production in the first quarter of 2025 and supply the Chinese and global markets.
The cost optimization of multiple business operations has once again emboldened Tesla to provide astonishing sales guidance.
Thanks to the reduction in car costs and the emergence of autonomous driving, Tesla's car sales can grow by 20% to 30% in the best case scenario next year, "Tesla CEO Musk boasted during a conference call after the financial report was released.
Everything for FSD
At a time when Tesla's rapid penetration of electric vehicles is nearing its end, is Musk's prediction of a "30% growth rate" still his grandiose words?
At least in the view of some analysts, if cost space allows, "sacrificing price for quantity" will be Musk's next focus on adjusting the automotive business direction. Once the sales guidance is not completed well, price reductions are likely to follow closely.
On July 1st this year, Tesla China announced interest free installment discounts for July, August, and September, and further extended the interest free policy in October. According to sources close to Tesla, this is also the first time the company has introduced the above policies in China.
The basis for such price reductions undoubtedly comes from the "room for maneuver" brought about by the company's cost control.
During the conference call, another noteworthy news was that Tesla's affordable models may begin production in early 2025.
However, at the same time, when asked by investors during the conference call whether a $25000 version of the Model 2 without intelligent driving would be launched, Musk directly denied the rumors by stating that he was not interested in it.
The reason behind this is that "selling cars" is just a means for Musk to bring autonomous driving to millions of households - in his vision, Tesla electric cars are only equipped with FSD (fully autonomous driving) terminal devices, and Musk doesn't seem to care whether the terminals make money or not.
Tesla still plans to launch more cost-effective models next year and keep the prices of certain models below $30000. Tesla will focus on autonomous driving in the future, and all existing vehicles will have this capability, "the company stated in a conference call.
In order to increase sales, Tesla may even be willing to let the company's gross profit margin fall again in the fourth quarter.
Tesla remains focused on expanding production and believes that its vehicles can provide higher value than other brands. Maintaining profit margins in the fourth quarter may face challenges, so (Tesla) will continue to focus on cost control, "said Waibaf Tania, Tesla's Chief Financial Officer (CFO).
Of course, during the conference call, Tesla still boasted about the speed of its FSD capability improvement. According to Musk, the future FSD V13 will have 5-6 times the intervention mileage compared to the 12.5 version, increasing it from approximately 20 kilometers to 100-120 kilometers - a capability that is considered a true standard for achieving fully autonomous driving.
In terms of FSD business progress, the company also upgraded the intelligent summoning function ASS of FSD in the third quarter, pushed FSD to Cybertruck users, and increased the number of H100 clusters deployed in the Texas Gigafactory in the United States.
It is worth noting that on October 23, there was news that Tesla had begun to apply for foreign-funded enterprises to operate value-added telecommunications services such as Internet data centers in China, which was also considered as a new signal that FSD was about to enter China.