Strong Q3 Performance
Tesla reported its third-quarter earnings on Wednesday, exceeding analysts’ expectations for profit despite revenue falling slightly short. Following the announcement, Tesla’s stock surged 12% in after-hours trading.
In the earnings report, Tesla’s stock posted adjusted earnings per share of 72 cents, surpassing the anticipated 58 cents. Revenue for the quarter reached $25.18 billion, slightly below the expected $25.37 billion. This marks an 8% increase compared to $23.35 billion in the same quarter last year. Net income rose to approximately $2.17 billion, translating to 62 cents per share, compared to $1.85 billion or 53 cents per share in the previous year.
Profit Margins and Automotive Revenue
Profit margins were bolstered by $739 million in revenue from automotive regulatory credits. Automakers must obtain a specific number of regulatory credits annually; those unable to meet the target can purchase them from companies like Tesla, which produces only electric vehicles.
Automotive revenue grew 2% to $20 billion from $19.63 billion a year earlier, remaining relatively flat since late 2022. In contrast, revenue from energy generation and storage soared 52% to $2.38 billion, while services and other revenue, which includes income from non-warranty repairs, increased 29% to $2.79 billion.
Growth Projections and Future Vehicles
During the earnings call, CEO Elon Musk indicated a best guess for vehicle growth next year at 20% to 30%, driven by the introduction of lower-cost vehicles and advancements in autonomous driving technology. Analysts surveyed by FactSet expect a total delivery increase of about 15% next year, projecting deliveries to reach approximately 2.04 million.
When asked about the potential for lower-cost electric vehicles beyond the Cybercab, Musk stated that all future Tesla models will be designed for autonomy. He highlighted that a significant majority of the 7 million vehicles produced to date are capable of autonomous features, noting that Tesla is currently manufacturing around 35,000 autonomous vehicles each week. However, it is important to clarify that Tesla does not yet produce vehicles that can operate completely independently of human oversight.
Musk announced plans to eventually produce 2 million Cybercabs annually, with the possibility of launching driverless ride-hailing services by 2025 in Texas, and likely California. He mentioned that Tesla has developed a ride-hailing app, currently in use by some employees, allowing them to request rides within the Bay Area, although a safety driver is still present for now.
Cybertruck Sales and Developments
In a shareholder presentation, Tesla revealed that the Cybertruck has become the third-best-selling fully electric vehicle in the U.S., following the Model 3 and Model Y. Despite facing quality issues, Tesla sold over 16,000 Cybertrucks in the U.S. during the third quarter, as estimated by Kelley Blue Book. The company reported that the Cybertruck achieved a positive gross margin for the first time.
Tesla’s Chief Financial Officer Vaibhav Taneja noted that the Full Self-Driving (FSD) system contributed $326 million in revenue during the quarter, bolstered by its availability in the Cybertruck and the introduction of the Actually Smart Summon feature. FSD is offered as a premium driver-assistance option, available for a one-time payment or a subscription fee.
Deliveries and Market Challenges
In the third quarter, Tesla reported vehicle deliveries of 462,890, representing a 6% increase from the previous year but falling short of analysts’ expectations. This decline follows two consecutive quarters of year-over-year decreases. To stimulate sales, Tesla has implemented various discounts and incentives.
The company expressed confidence in achieving slight growth in vehicle deliveries for 2024 despite ongoing macroeconomic challenges. Additionally, Tesla reiterated plans to launch more affordable models in the first half of 2025.
As competition intensifies, especially from companies like BYD and Geely in China, Tesla faces increasing pressure. Legacy automakers, including Ford and General Motors, are also ramping up their electric vehicle offerings.
Market Reactions and Political Implications
The earnings report came shortly after a highly anticipated robotaxi event that left many shareholders seeking more information. It also coincides with the upcoming presidential election, which has drawn Musk’s attention as he actively supports former President Donald Trump.
Investors have raised concerns about how Musk’s political activism may affect Tesla’s stock performance, although no related questions arose during the earnings call.
Prior to the post-earnings surge, Tesla’s stock had dropped 18% in October, marking its worst month since January. Year-to-date, shares are down 14%, while the Nasdaq has risen by 22%. Despite Musk’s significant investments aimed at supporting Trump’s campaign, there are concerns regarding the former president’s stance on federal EV spending and regulations that have historically benefitted Tesla. Musk has previously expressed skepticism about the effectiveness of U.S. government regulations and agencies.
