$139.5M – Tesla remains profitable – Model 3 delivers

Tesla has managed to stay profitable in Q4 2018 and thus reported its second consecutive quarterly profit. Still, Tesla earnings were hit on some fronts, but sales are looking good with Tesla having sold over 140,000 Model 3 throughout 2018 with more to come.

Profit was down from last quarter when Tesla made 300 million dollars in Q3. In Q4 it was no more than 139.5 million dollars, but that was expected due to Tesla starting deliveries of the less expensive Mid-Range Model 3 in the previous quarter.

In concrete numbers, Tesla announced that it made $7.2 billion in revenue and earnings of $1.98 per share (non-GAAP). This is a little less than Wallstreet had expected, and so shares fell slightly when the market closed today. Factors leading to a decline in revenue were less money to be made from the sale of regulatory credits (ZEV), higher import duties on parts from China as well as lower prices on the Model S and Model X in China and a lower-priced mid-range version of Model 3.

To put this into the long-term perspective, the Californian group is forecasting sales of just under 21.5 billion dollars for the whole year – almost twice as much as in the previous year. The automotive business alone contributed 18.5 billion dollars mainly due to Model 3. The energy sector with Tesla battery storage units and solar systems from SolarCity generated around 1.5 billion dollars, with a further 1.4 billion coming from the service business and other areas such as the sale of zero-emission vehicle credits.

Again, the Model 3 prove to be Tesla’s most significant driver. Throughout 2018, Tesla delivered a total of 145,846 Model 3, making it “the best-selling premium vehicle (including SUVs) in the US for 2018,” says Tesla and thinks this will continue. Reads the filing: “In 2019, full-year Model 3 volumes will grow substantially over 2018 due to a full year of high production rates at our Fremont facility.”

In more concrete terms, Tesla is “expecting to deliver 360,000 to 400,000 vehicles” throughout 2019. In Q4 last year, they brought 63,359 units of the electric sedan to customers.

Of the larger (and older) S and X models, Tesla delivered 27,607 units to customers worldwide in the fourth quarter. For the year as a whole, Tesla reports just under 100,000 deliveries of this type – 99,475 Model S and Model X to be precise, which met its expectations. The bottom line is that Tesla was able to produce and launch almost a quarter of a million electric cars in 2018.

Already they can make up to 7,000 Model 3 a week in Fremont, albeit it as a demo production over 24 hours so far, and target to “produce 10,000 Model 3 vehicles per week on a sustained basis” between Fremont and Gigafactory 3 in Shanghai.

Moreover, Tesla reckons “the capital spend per unit of capacity for this factory (G3) to be less than half of that of our Model 3 line in Fremont.” If so, this would make the Model 3 a real competitor on the Chinese market, the same market that this time ate into Tesla’s profit. The EV maker had kept prices low despite a hike in import duties.

But the Model 3 is not all. Reads the letter further: “Additionally, this year we will start tooling for Model Y to achieve volume production by the end of 2020, most likely at Gigafactory 1. All of these activities are setting us up for very significant annual growth in 2019 and beyond.”

Given these plans, it is all the more surprising that Tesla projects capital expenditures of only $2.5 billion for the year.

Another growth sector was infrastructure, and Tesla claims: “In Q4, we opened 69 new Supercharger locations for a total of 1,421 Supercharger stations globally. To date, we have approximately 12,000 dedicated Supercharging connectors and over 21,000 Destination Charging connectors globally.” The roll-out for what Tesla calls V3 technology to enable faster charge times is also underway and to be expected “early this year”.

tesla.com (letter to shareholders)