Tesla reports its Q4 2019 earnings and, they are better than Wallstreet expected; in fact, the revenue is at a record high with profits incoming. Plus, the electric carmaker says, Model Y production is underway ahead of schedule with deliveries expected to start “by the end of Q1 2020”.
This confirms earlier rumours of a headstart for Model Y production at the Tesla factory in Fremont as reported.
But now to the actual earnings. Tesla reports record revenue of $7.38 billion, 300M above what analysts expected, and shares have risen by 7% shortly after the news. Overall, shares in Tesla have risen by more than 120% since the company released its Q3 2019 earnings update in October last year. At that time, Tesla managed a profitable quarter through spending cuts or the expansion of Model 3 sales outside the U.S., after two earlier quarters of losses.
To put the earnings into closer perspective, the close to 7.4 billion turnovers is above the record levels of the second half of 2018 (6.8 and 7.2 billion dollars). Gross profit is a little less than the record reached in Q4 2018 with about $1,443,000 vs $1,391,000 in Q4 2019. That is a Q4 profit of $105M, $35M below the Q4-2018 record. The decrease is best explained with investments in production facilities on now three continents. Still, it is undoubtedly a stable profit, and Tesla now considers the business “self-funding”.
A word on said production, the Tesla factory in Fremont is now ready to produce 400,000 electric cars a year, including all models. While Model Y production is underway, Tesla says, the ramp-up “will be gradual as we will be adding additional machinery in various production shops. After such expansions are done by mid-2020, installed combined Model 3 and Model Y capacity should reach 500,000 units per year.”
So as a forecast for 2020, Tesla projects global vehicle deliveries should “comfortably exceed 500,000 units”. Already Q4 had been looking good for Tesla in terms of shipments when it stated to have delivered 112,000 electric cars of which 92,550 were Model 3 and 19,450 were Model S and Model X as reported.
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Also in Shanghai, Model Y production is under construction and Tesla says it has broken ground for the next phase of Gigafactory 3. “Given the popularity of the SUV vehicle segment, we are planning for Model Y capacity to be at least equivalent to Model 3 capacity,” says the report. That is currently at 150,000 units a year, but the Model Y won’t be built in China before 2021. Although, given that Tesla stresses that it was “able to start Model 3 production in Gigafactory Shanghai in less than ten months from breaking ground” – who knows whether the Model Y won’t get a headstart in China as well.
For the Gigafactory 4 in Berlin and Brandenburg, Tesla is still planning also to make both the Model 3 and Model Y there. The company says “the first deliveries from this factory are expected in 2021”.
The official purchase agreement between the State of Brandenburg and Tesla concerning the land for the planned factory has been notarised only this week. However, the purchase price may still change. The current estimate of 41 million euros is pending a second expert report. The final transfer of ownership with an entry in the land register takes place upon payment of the final purchase price.
The company also worked on its cashflow and reports generating $1.1 billion of free cash flow for the year, again due to cost control. There is also $6.3Bn in reserve. Tesla expects the positive quarterly free cash flow “going forward, with possible temporary exceptions, particularly around the launch and ramp of new products”. The Cybertruck and Roadster production is in development only in North America. The EV maker is also saying it will produce limited volumes of Tesla Semi this year.
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