Tesla reported its Q3 earnings on Wednesday that topped analysts’ estimates even as revenue came in just shy of expectations. Tesla stock was up more than 12% in extended trading. Tesla’s CEO Elon Musk said he expects vehicle sales to grow 20% to 30% next year. He reassured the investors that Tesla was improving its core business of selling electric vehicles profitably, and reducing concerns about when it could produce a robotaxi.
The Tesla’s forecast, building on a target for “slight growth” in deliveries this year, pushed the company’s share price up 12% in post-market trading on Wednesday. This set up Tesla to add about $80 billion in stock market value.
Tesla’s financial performance
Based on a survey of analysts by LSEG, here’s what the company reported compared with what Wall Street was expecting:
Tesla’s earnings per share: 72 cents, adjusted vs. 58 cents expected.
Tesla’s revenue: $25.18 billion vs. $25.37 billion expected.
Revenue of Tesla increased 8% in the quarter from $23.35 billion a year earlier. Yesla’s net income rose to about $2.17 billion, from $1.85 billion from a year ago.
Boost in Tesla’s Q3 profit margin
Profit margins were bolstered by $739 million in automotive regulatory credit revenue during the quarter. Automotive revenue increased 2% to $20 billion from $19.63 billion in the same period a year earlier and is about flat since late 2022. Energy generation and storage revenue soared 52% to $2.38 billion, while services and other revenue, which includes revenue from non-warranty repairs of Tesla vehicles, jumped 29% to $2.79 billion.
Tesla’s forecast
As per CEO Elon Musk, on the earnings call his “best guess” is that “vehicle growth” will reach 20% to 30% next year, due to “lower cost vehicles” and the “advent of autonomy.” Analysts surveyed by FactSet were expecting a total increase in deliveries next year of about 15% to 2.04 million.
Tesla said in a statement earlier it remained focused on expanding its vehicle lineup, cutting costs. This was along with making critical investments in AI projects and production capacity, despite uncertain demand and rivals pulling back on EV investments.
“Preparations remain underway for our offering of new vehicles – including more affordable models – which we will begin launching in the first half of 2025,” it said.
Sustenance of profit a challenge for Tesla
Tesla’s finance boss, Vaibhav Taneja, said it would be “challenging” to sustain these margins in the Q4 ending December.
The EV giant said that the labor and material costs of making vehicles, known as the cost of goods sold per vehicle, dropped to its lowest-ever level, about $35,100. Adjusted profit of 72 cents per share in the third quarter beat an average estimate of 58 cents.
Prices of raw materials used to make EV batteries have been falling and Tesla has said its costs will decline as a result this year, with the effect diminishing over time.
Taneja forecast more than $11 billion in capital expenses for next year.
Tesla working to boost demand
After slashing prices last year, Tesla started offering lucrative financing options this spring to boost demand.
It has already delivered 1.29 million vehicles in the first nine months of this year. It needs to hand over another 514,925 vehicles to beat last year’s record.
“The fear going into results was that the huge incentives effort to push volumes into the tough EV market would materially dent margins – that doesn’t look the be the case,” said Matt Britzman, a senior equity analyst at Hargreaves Lansdown who also personally owns Tesla shares.
Tesla said it recognized its second-highest quarter of regulatory credit revenue. This metric was up 33% year-over-year to $739 million, but down from $890 million in the second quarter.
Record Q3 deliveries for Tesla
Earlier this month, Tesla reported third-quarter vehicle deliveries of 462,890. Deliveries are the closest approximation to sales reported by Tesla. The company also said it had produced 469,796 electric vehicles in the period ending Sept. 30.
While deliveries increased 6% from a year earlier, they fell shy of analysts’ expectations and followed two straight quarters of year-over-year declines. Tesla has been offering an array of discounts and incentives to spur sales.
Competition for Tesla
Tesla is facing increased competitive pressure, especially in China, from companies such as BYD and Geely, along with a new generation of automakers, including Li Auto and Nio. In the U.S., legacy automakers Ford and General Motors are starting to sell more electric vehicles, despite walking back prior electrification commitments.
Tesla stock update
Tesla share price rose to $239.50 up 12% after hours due to profit rirse. Prior to Wednesday’s after-hours pop, the stock was down 18% in October and headed for its worst month since January. For the year, the shares were down 14%, while the Nasdaq is up 22% over that stretch.
