Electric vehicle manufacturer Tesla (TSLA.US) has experienced a rollercoaster ride in its stock performance this year. After announcing its Q3 2024 financial results after the market closed on October 23, 2024, Tesla's stock price surged by over 12% in the after-hours trading, and as of the pre-market trading on October 24, it rose by 11.67%.
Q3 Performance Exceeds Expectations
In Q3 2024, Tesla's total deliveries grew by 6.40% year-over-year to 462,900 units, as shown in the figure below. By October 22, 2024, Tesla achieved the production of its 7 millionth electric vehicle. Musk mentioned that its weekly production of smart cars (capable of autonomous driving) reached 35,000 units, while Waymo's entire fleet is less than 1,000 vehicles.
However, due to changes in product mix, pricing adjustments, and financing incentives, the average selling price of its vehicles (excluding currency effects) has decreased. In Q3, Tesla's automotive sales revenue was $18.831 billion, growing by only 1.34% year-over-year; automotive total revenue slightly increased by 1.99% year-over-year to $20.016 billion. Nevertheless, the quarterly revenue from power and energy storage business as well as services and other businesses grew by 52.41% and 28.81% year-over-year, respectively. The total Q3 revenue increased by 7.85% year-over-year to $25.182 billion, slightly below the market expectation of $25.37 billion.
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It is noteworthy that Tesla's profitability in Q3 has seen a significant improvement.
The company disclosed that its cost per vehicle has dropped to the lowest level ever—$35,100, approximately 249,700 RMB—while the starting price of Tesla's most basic model, the Model 3 rear-wheel-drive version, in China is 231,900 RMB. This is mainly due to the reduction in raw material costs, freight, tariffs, and other one-time expenses. The per-vehicle production cost at the Shanghai factory continued to improve quarter-over-quarter and has been reduced to the lowest level.
Caijing Society observed that Tesla's automotive sales gross margin in Q3 2024 improved from 15.75% in the same period last year and 13.86% in the previous quarter to 16.40%.
Furthermore, the company's power and energy storage, as well as services and other segments, have seen a continuous improvement in gross margins, reaching 30.51% and 8.82% in Q3, respectively. Compared to the same period last year, these improved by 6.07 percentage points and 2.86 percentage points, respectively, and compared to the previous quarter, they improved by 5.96 percentage points and 2.41 percentage points, respectively.
Interestingly, the CFO revealed during the earnings call that Tesla's North American launch of FSD and True Autopilot Summon (ASS) for the Cybertruck contributed $326 million in revenue in Q3, which should be classified under the services and other segment.Driven by improvements in gross margins from both automotive sales and non-automotive sales, Tesla's consolidated gross margin for the third quarter of 2024 increased by 1.95 percentage points year-over-year and by 1.89 percentage points quarter-over-quarter, reaching 19.84%.
The improvement in gross margins, coupled with a 5.55% year-over-year decrease in quarterly operating expenses, led to an improvement in the company's operating profit margin to 10.79%, higher than the 7.55% in the same period last year and the 6.29% in the previous quarter. Tesla's non-GAAP diluted earnings per share for the third quarter were $0.72, a 9.09% increase year-over-year and a 38.46% increase quarter-over-quarter, also exceeding market expectations of $0.58.
Deliveries and mass production of affordable new vehicles in the first half of next year
In terms of production capacity, Caihuashe estimates that Tesla's production capacity should be over 2.35 million units, as shown in the figure below. However, Musk revealed that its production capacity could reach up to 3 million units at its peak.
Tesla disclosed that the total production of the new Model 3 at its U.S. factories (California, Nevada, and Texas) increased in the third quarter compared to the previous quarter, while the cost of sales decreased compared to the previous quarter. Cybertruck production increased quarter-over-quarter and achieved a positive gross margin for the first time. Preparations for the Semi factory continue, and construction is scheduled to begin at the end of 2025 as planned.
The Shanghai factory recently achieved two milestones: 1) producing its 3 millionth vehicle in October and exporting its 1 millionth vehicle in September; 2) the cost of production per vehicle continued to improve quarter-over-quarter and has been reduced to the lowest level.
The operating cost per vehicle at the European Berlin factory improved quarter-over-quarter. As of the third quarter of 2024, the Model Y was the best-selling vehicle in Sweden, the Netherlands, Denmark, and Switzerland for 2024 and was also the best-selling vehicle in Europe in September. In the third quarter, the Model Y was the best-selling electric vehicle in Norway, with 60,000 now sold in the country.
Management believes that Tesla is currently between two growth waves: the first phase began with the global expansion of the Model 3/Y platform, and the next phase will be driven by advancements in autonomous driving technology and the launch of new products, including those based on its next-generation automotive platform.
Tesla expects its full-year 2024 vehicle deliveries to achieve slight growth. Caihuashe estimates that the company's vehicle deliveries for the first three quarters of this year may be 1.29 million units, a 2.30% decrease year-over-year, which implies that its fourth-quarter deliveries are expected to continue to rise.
The company expects its energy storage deployment this year to more than double year-over-year, which means its energy storage business will continue to grow strongly in the fourth quarter.In terms of profit outlook, Tesla has indicated that it will continue to implement innovation to reduce production and operational costs, in order to optimize profits related to hardware businesses. At the same time, the company will actively expand into AI, software, and fleet-related business profits, generating revenue from services such as FSD and Smart Summon starting from the third quarter. This may reflect Musk's determination to follow Apple's (AAPL.US) strategy of using hardware to attract users and software to retain them.
On the hardware front, Tesla has always maximized profits through the optimization of production processes. For instance, Tesla has stated that its Robotaxi product will continue to employ the innovative "Unboxed" (modular) production strategy, which is akin to assembling building blocks, thereby eliminating the need to open new production lines for specific models and achieving cost efficiency.
Furthermore, Tesla's self-developed battery, the 4680, is progressing well and is on the verge of becoming the most competitive battery in the United States—costs are lower after accounting for subsidies and tariffs, and the cost per kilowatt-hour is also reduced.
Nevertheless, due to the significant increase in future vehicle production and the expansion of energy storage, Tesla will still need to purchase a large number of batteries from competitors and cannot rely solely on self-developed batteries.
Regarding new products, Musk has indicated that an affordable vehicle model will be delivered in the first half of 2025. He roughly estimates that, barring any unexpected events, the increase in vehicle deliveries next year may be between 20% and 30%. He expressed confidence that the Cybercab could achieve mass production by 2026. His goal is to produce at least 2 million Cybercabs annually, not exceeding the production of a single factory, with the ultimate aim of achieving mass production of 4 million units (this is his most optimistic estimate).
These new products will be produced using a new generation platform as well as the existing platform. The affordable model can be adapted to the production lines of existing models, effectively reducing costs and maximizing the use of production capacity.
In terms of software and services, Musk revealed that he expects to launch a ride-hailing service for the public in California and Texas next year. The regulatory approval process in California is lengthy, but he believes it should be approved by next year; Texas will be much faster, and the service will definitely be launched there. Additionally, ride-hailing services may also be launched in other states next year.
In the energy storage business, the Lathrop Megapack factory has reached a weekly production of 200 Megapacks, with an annual operating rate of 40 gigawatt-hours. Tesla built its second energy storage factory in Shanghai in May this year, which is expected to start production in the first quarter of next year. The energy storage capacity will start at 20 gigawatt-hours and then gradually expand. Soon, Tesla will be able to deliver 100 gigawatt-hours of energy storage annually. According to information disclosed by Tesla's public account, a single Megapack can store more than 3,900 kilowatt-hours of electricity, equivalent to the battery capacity of 65 Model 3s, or equivalent to a basic Model 3 traveling over 39,000 kilometers.
In summary, Tesla's performance in the third quarter of 2024 exceeded Wall Street's general expectations and provided a rather optimistic outlook, which also led to a rise in the stock price of this electric vehicle manufacturer after the results were announced. However, Tesla's stock price has累计 declined by 14.02% this year, and whether its rebound can continue will need to be observed in the performance of the next few quarters.
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