What do Tesla’s financial results mean for the EV sector?

Elon Musk

Elon Musk

Electric car giant Tesla reported second quarter revenue of $12bn, ahead of market expectations for $11.3bn, and up 98% year-on-year. That reflects a 148% increase in Model 3/Y deliveries, more than offsetting a decline in Model S/X deliveries due to product updates.

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Average sales prices fell 2% year-on-year, reflecting higher sales of lower priced cars in China.

Total revenue included $10.2bn in Automotive revenues, up 97% year-on-year despite a 17% fall in automotive credits, which came in at $354m. Automotive gross margin in the quarter reached 28.4%, or 25.8% once regulatory credits are eliminated. Elsewhere in the business, Energy Storage saw sales more than double year-on-year to $801m, while Services & Other revenue rise 95.3% to $951m.

Operating margins hit 11.0%, up from 5.7% last quarter and 5.4% a year ago. That’s despite a $176m share based payment to Elon Musk, lower regulatory credit revenues and a bitcoin related impairment of $23m. As a result of the improved operating profit, earnings per share rose to $1.02, well ahead of analyst expectations.

Capital Expenditure rose 176% to $1.5bn. That reflects ongoing construction of the Berlin and Texas Gigafactories, expansion at plants in Shanghai and California, and continuing investment in product development.

Despite the increased capital expenditure, the group reported $619m of free cash flow, up from $418m a year ago. As a result, net cash rose from $6.3bn at the start of the quarter to $6.8bn.

Tesla didn’t update longer term production or profit guidance, although reiterated that it has sufficient liquidity to fund its product roadmap and long-term expansion plans.

The first Berlin and Texas Model Ys are expected in 2021, although the launch of the Semi truck programme has been pushed to 2022 due to supply chain challenges. The group is currently producing at the limits of available parts – with particular challenges in semiconductor supply.

Tesla shares rose 1.4% in aftermarket trading.

Impact of the semiconductor supply chain and Chinese demand

Nicholas Hyett, Equity Analyst at Hargreaves Lansdown comments: “The main impression of Tesla from these numbers is one of resilience. Despite the decline in higher margin Model X/S deliveries, an increase in lower value Chinese vehicles and potential headwinds from global computer chip shortages, Tesla has managed to grow production substantially and crucially margins have improved dramatically too.

“Part of that is down to Tesla achieving the scale that’s key to competing in the automotive market. Because factories are essentially giant fixed costs, pumping more cars through the same footprint boost revenues without boosting costs by the same degree. What makes these numbers all the more impressive is that, despite the record $1.5bn in capital expenditure, scale has been achieved while keeping cash flows positive. Even if you take off the controversial regulatory credit sales the group remains in the black.

“As a result, the group’s on course to deliver its first European Model Ys this year, despite problems in the semiconductor supply chain being felt across the industry. The Semi truck programme has been sacrificed to make that happen, pushed back to 2022, but Tesla investors should be used to product delays by now – they’re something of a hallmark of the electric car giant.

“There have been missteps – and it’s hard to see a $23m write-down in the value of the group’s bitcoin hoard as anything other than an unnecessary own goal. However, the negatives are insignificant in the context of wider successes this quarter.”

Growth of the EV market

Tesla reported more than $1 billion in net income during Q2, up tenfold from a year ago. Below, Anila Siraj, Head of Data Strategy ― and EV lead at Kalibrate, discusses why Tesla has been experiencing such growth, and how moving forward, other car manufacturers and retailers can profit off of the EV market too.

“In terms of volume, Tesla is putting more and more cars on the road every year. This, coupled with its devoted fan-base, higher end models, and easier availability of new tech such as FSD through subscription has kept the company on a trajectory for growth. Even though traditional petrol and diesel car manufacturers have committed to changing their vehicles to electric, we can see Tesla remains at the forefront of the EV revolution. Even in China, despite some hurdles, Tesla has successfully taken market share from popular, home-grown brands.

“Overall, a key part of this success is down to increased driving range, availability of chargers, as well as government backing and legislation. Yet, if other manufacturers and businesses alike want to capitalise on the EV revolution and rival Tesla, they’ll need to implement a data-led strategy that allows them to understand driver’s characteristics and behavior better. To uncover customers and potential customers, businesses must look at who they are, where they are based and what practicalities are needed to convince them to make the switch from traditional cars to EV.

“What’s more, there’s a huge gap for retailers to commit to the EV revolution as three-in-five (59%) EV drivers want to spend more money at businesses with charging facilities. The EV space is being rocked and we’re accelerating to a tipping point, so there is a need for businesses to have the correct education, assistance and guidance if they’re to have a strong presence in the market. While Tesla may quite literally be charging the EV revolution, it’s now time for fuel and non-fuel retailers alike, similar to 7-11, Walgreens, Costa and Waitrose, to prepare and adjust their infrastructures to meet drivers’ ever-changing demands.”

UK Tesla drivers save almost £30 p/m in charging costs compared to equivalent fuel costs for petrol car drivers

The average Tesla driver spends £47 per month charging their car, or the same as only 36 litres of petrol, according to data from EEVEE Mobility. Harnessing data from active users of the EEVEE Driver app in the UK, the company also found that the cost of charging equates to just £0.20 per kilowatt-hour of electricity.

The average distance driven per month by EEVEE users is 707 miles. Based on an average fuel price of £1.30 per litre with fuel economy of 55mpg, the cost of travelling the same distance in a petrol car would be £75, representing a saving of £28 for Tesla drivers.

The EEVEE Driver app is an indispensable tool for electric vehicle (EV) owners who want to know how much they’re really spending on charging. It is the only service that connects directly with vehicles to unlock real-time data on consumption, cost and efficiency. By tracking spending at each charging location, EEVEE also makes it easy for company EV drivers to declare charging costs and have them reimbursed.

EEVEE Mobility founder, Steffen Brans said: “Here at EEVEE, we believe that transparency in charging costs is essential to drive EV adoption. This data begins to paint a picture of the real-world behaviour of EV owners and in doing so highlights one of the key benefits of EV ownership – lower running costs.

“We always knew that it’s cheaper to fill your car up with electricity rather than petrol, but thanks to EEVEE, we now know exactly how much it is costing drivers to charge their EVs. As a Tesla owner myself, these findings are incredibly useful, and I look forward to seeing how the data evolves as cars from different manufacturers become compatible with EEVEE.”

Impact on the US market

Tesla vehicles have dominated the US electric vehicle market over the last three years. According to data presented by TradingPlatforms.com, Tesla electric vehicles (EV) hold a combined 74% share of the US electric vehicle market – combined unit sales of 430,592 from 2018-2021.

Tesla Sold More Than 430K Units of Tesla Electric Vehicles From 2018-2021

According to a recent report, the top 10 selling EVs in the US for the last three years account for 97% of all EVs sold in the US for the same time period. As of May 2021, the Tesla Model 3 is the top-selling EV in the US over the preceding three years with 296,392 total unit sales giving Tesla’s most popular model a 50.6% share of the US EV market.

Tesla’s two other models, the Tesla Model S and the Tesla Model X, both hold an 11.5% share of the market with 67,335 and 67,225 total unit sales respectively over the last three years. This gives Tesla’s three EVs an estimated combined 74% share of the market.

The Chevy Bolt is the closest competitor to Tesla with 57,629 units sold in the same time period for a 90.8% share, while the Nissan Leaf was the only other EV to hold a more than 5% share of the US EV market.

As of May 2021, Forbes lists Tesla as the 8th largest company in the world with a market capitalization of $710.1B.

Rex Pascual, editor at TradingPlatforms.com, commented: “Tesla is not only dominating the US EV market but is also a market leader in many EV rich regions such as Mainland China and the EU. Tesla’s status as one of the pioneers to bring EVs into the mainstream solidifies its position as a market leader of the EV industry for years to come.”

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