Tesla defies Covid-19 odds with $6bn in revenue

23 Jul 2020

Image: © sheilaf2002/Stock.adobe.com

Despite its main factory shutting down for almost half the quarter, Tesla has reported positive Q2 2020 earnings.

Tesla’s Q2 2020 earnings saw it bring in $6bn in revenue and a profit of $0.50 per share, bringing the company into its fourth quarter of profitability in a row.

Although the company warned that Covid-19 would potentially slow down production in its Q4 2019 earnings report, it reported that its operating profit has improved, “despite challenging circumstances”.

Its main factory in Fremont closed for almost half the quarter, but “fundamental operational improvements” saw its free cash flow amount to $418m.

Contributing factors, Tesla said, included “a temporary reduction in employee compensation expense” and “a sequential increase in regulatory credit revenue”.

Upgrades to its range of technology products also helped, it added. The company recently updated its flagship Model S vehicle to hold an EPA-tested range of 402 miles, making it the “first production electric vehicle in history to break the 400-mile range threshold”.

Its large-scale battery system, Megapack, generated a profit for the first time in Q2 2020 and its retrofit solar panel installation service tripled in the US in comparison to Q1.

The company also reported that, while its four existing facilities have continued to meet demand in Q2, it will build an additional three factories on three separate continents later this year.

One of these will include a Gigafactory in Berlin, which the company said will be fully functional by the end of 2021. In its new report, it confirmed that it is on track to meet this deadline and that it is “implementing further structural improvements based on our learnings from prior factories”.

The company has also chosen its next US Gigafactory site and “preparations are underway”.

Did it meet expectations?

At the end of 2019, Tesla was confident that its vehicle deliveries would “exceed 500,00 units” in 2020 and that solar and storage deployments would grow by at least 50pc throughout the year. Its latest earnings report confirmed that the level of demand for its Megapack “remains above our capacity”.

Q2 revenue for Tesla remained “relatively flat” quarter-on-quarter, it said, with the “positive impact of higher vehicle deliveries” offset by lower vehicle average selling price.

Quarter-end cash equivalents increased by $535m from the previous quarter to $8.6bn. Free cash flow was negatively impacted, it said, by more deliveries taking place towards the end of Q2 compared with previous quarters. The company added that “since vehicle production resumed in Fremont and Nevada in early May”, its “days payable outstanding” wasn’t impacted as much as it had anticipated.

Tesla’s report said: “Although we have successfully ramped vehicle production back to prior levels, it remains difficult to predict whether there will be further operational interruptions or how global consumer sentiment will evolve in the second half of 2020.

“We have the capacity installed to exceed 500,000 vehicle deliveries this year, despite recent production interruptions. While achieving this goal has become more difficult, delivering half a million vehicles in 2020 remains our target.”

Lisa Ardill was careers editor at Silicon Republic until June 2021