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  • Writer's pictureHenri Caron

TESLA Rises Amid the Shadows: Reports Best 1Q Ever

Despite the uncertainty over the its ability to deliver profits, the production setbacks brought by the coronavirus, the concerns from investors related to its solvency, Tesla, which produces and sells fully electric vehicles, and energy storage systems, managed to secure its first 1Q net profits ever.

In a statement released Apr 29 it reports positive Q1 operating income of $283 M and a net income of $16M:

“Q1 2020 was the first time in our history that we achieved a positive GAAP net income in the seasonably weak first quarter. Despite global operational challenges, we were able to achieve our best first quarter for both production and deliveries.

Tesla’s shares, which have seen a 199.7% gain YoY, rose to an all-time high of $869 the day after the announcement. Year on year Tesla grew revenues 14.52% from 21.46bn to 24.58bn while net income improved from a loss of 976.09m to a smaller loss of 862.00m.

The company, founded by entrepreneur Elon Musk in 2003, with a vision to accelerate the world’s transition to sustainable energy, has waged some sort of David vs Goliath cultural war against Wall Street, considered by Musk to be a conservative-biased corporate establishment unable to see the future.

All in all, Tesla has secured a leadership position in the Electric Vehicles market competing with brands such as VW, Toyota, DM and Ford.

In 2008, the Roadster model unveiled Tesla’s cutting-edge battery technology and electric powertrain. From there, Tesla designed the world’s first ever premium all-electric sedan – Model S – which has become one of the best cars in its class. Model S has ranked among the top electric vehicle selling lists together with Nissan’s Leaf and the Chevy Bolt.

Most automobile brands have aunched their own version of EV, as the segment continues to grow. Cumulative global sales of highway-capable electric vehicles reached 3 million in November 2017. Among the best selling models are Tesla’s Model S, Nissan’s Leaf, Chevy Volt and Opel/Vauxhall Ampera and Mitsubishi’s Outlander.

In 2015, Tesla expanded its product line with Model X, a sport utility vehicle and in 2016, Tesla introduced Model 3, a low-priced (starting as low as $30,000), high-volume electric vehicle that began production in 2017. Soon after, Tesla introduced the Tesla Semi truck, which is designed to save owners at least $200,000 over a million miles based on fuel costs alone.

As of January 2018 Model S became the second to sell over 200,000 examples after the Nissan Leaf, which having more time on the market and costing less, crossed 300,000, according to Hybrid.com

Tesla has an installed capacity of 500,000 in its Freemont (USA) plant; and is building two additional plants in Berlin and Shanghai.

Sleek design, technological structure, and an online platform, which allows customers to book their vehicle with just a minimum down payment, and follow up on their order, plus the constant innovative ways to make technological advancements more affordable and accessible to people have gained it a base of loyal followers.

The share value spiked from $180 in May 2019 to $960 this year, reaching a $135 bn capitalization, which is higher than that of VW and Daimler together. Yet, Tesla sells a tiny fraction of cars (368.000) compared to VW (10 million), Toyota (9 million); GM (8.4 million); Ford (5 million); Daimler (3.4 milion).

So, why is Tesla’s share price so high?

“Bulls argue that Tesla is not valued on the here-and-now, that its valuation of 5.8 times revenues to enterprise value, 10 times the industry average, is a reflection of potential future growth for its new models and theoretically high-margin technology services, such as self-driving cars” according to FT.

“Tesla is the 15th most held stock by investors on the Robinhood stock trading app, with more than 150,000 users owning its shares. The rising price marks a win for Mr Musk against the short-sellers and sceptical Wall Street analysts who complain about the company’s financial picture.The billionaire founder has stoked an “us versus them” war between his retail investor fan base and Wall Street.”, as printed on the FT early this year.

Latest Q1 results represent an unprecedented victory for Tesla, paving its way to becoming king of the car of the future.

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