Tesla Stock: Margins Bounce Back For AI-Leader
- by Forbes
- Oct 24, 2024
- 0 Comments
- 0 Likes Flag 0 Of 5
Today’s NYT Mini Crossword Clues And Answers For Thursday, October 24
For the third quarter, Tesla reported automotive revenue of $18.83 billion, up just 1.3% YoY and 1.6% QoQ, and short of the consensus estimate for $19.50 billion. As a result, Tesla’s overall revenue fell short of estimates, with Tesla reporting $25.18 billion in revenue, nearly half a billion below the consensus for $25.67 billion.
A quick look at the growth rates shows that automotive revenue growth lagged delivery growth by just over 5 percentage points, at 1.3% versus 6.4%. This tells investors that automotive selling prices declined once again, and to a large degree – Q3’s ASP fell below $42,000, down ~(1.7%) from Q2 and falling (5.6%) from nearly $44,500 last year.
Notably, there is risk the ASPs fall lower in Q4 as Tesla continues to cut some prices, with the Cybertruck seeing up to 20% cuts on different model variants in October. Musk mentioned that Tesla would be aiming for YoY growth, and with just Q4 left, that means Tesla would have to deliver more than 515,000 vehicles, a record high. This would also imply an acceleration to 11% QoQ growth, leaving the door open for more aggressive price cuts to spur demand, something management hinted at in the earnings call.
Tesla is aiming high for 2025, with Musk stating that the automaker is shooting for “20% to 30% vehicle growth next year,” or roughly at least 2.1 million vehicles assuming Tesla ends 2024 at around 1.75 million. Taneja added that Tesla’s “focus remains on growing unit volume, while avoiding a build-up of inventory. To support this strategy, we're continuing to offer extremely compelling vehicle financing options in every market.”
The Fed has forced Tesla to focus on financing and affordability, which in turn, has been a major driver of margin issues. I noted in July 2023 that the “comment on interest rates is the most important comment from the call as high interest rates mean Tesla must lower prices,” and that Tesla was “one of many tech stocks whose revenue growth and profitability is on borrowed time until the Fed instills a more dovish policy.”
Tesla’s Profitability Improved on Cost Optimizations
Despite ASPs declining again sequentially, profitability improved and automotive margins recovered as Tesla captured some tailwinds from “lower raw material costs, freight and duties” and drove vehicle production costs to a record low.
Tesla headed into Q3’s report facing a tough test, as average selling prices were flat and vehicle production costs were rising. From Q4 2023 to Q2 2024, ASPs were relatively unchanged while production costs rose 3.7%, denting both automotive margins and impacting profitability. This had been hindering Tesla’s ability to revitalize automotive gross margins — as a result of those two changes, automotive gross margins took quite a large hit, falling from 17.2% to 14.6% in that two-quarter span.
Q3 saw a sharp improvement in automotive gross margin, expanding ~240 bp QoQ and ~72 bp YoY, as
... [+] Tesla drove production costs to a record low of ~$35,106.
Source: I/O Fund
Q3 saw a sharp improvement in automotive gross margin, expanding ~240 bp QoQ and ~72 bp YoY, as Tesla drove production costs to a record low of ~$35,106, dropping ~(4.6%) from $36,802 just last quarter.
Because of the large improvements in production costs, average gross profit per vehicle bounced back, increasing ~16.3% QoQ to reach ~$6,886, up from $5,921 last quarter. Essentially, Tesla manufactured and sold 14,000 more vehicles this quarter for ~$220 million cheaper than last quarter.
Average gross profit per vehicle bounced back, increasing ~16.3% QoQ to reach ~$6,886, up from
... [+] $5,921 last quarter.
Please first to comment
Related Post
Stay Connected
Tweets by elonmuskTo get the latest tweets please make sure you are logged in on X on this browser.
Sponsored
Popular Post
Tesla: Buy This Dip, Energy Growth And Margin Recovery Are Vastly Underappreciated
28 ViewsJul 29 ,2024