The latest Tesla earnings call reveals a tenfold increase in net income, meaning Tesla made over one billion dollars after expenses. The company also continues to produce at capacity, amid persisting global challenges and record demand for electric cars.
Tesla reported $1.14 billion in (GAAP) net income for Q2 – the first time it has surpassed $1 billion. This is among a revenue of $11.96 billion, mostly made by selling cars. Overall automotive revenues amounted to $10.21 billion, of which only $354 million came from sales of regulatory credits – less than in any other year.
Tesla’s impressive increase in margins over the last quarter and over the last year was made possible by three main factors and one minor factor, according to Tesla CFO Zach Kirkhorn: Cost optimisation (major), cost reduction plans (major), increased volumes (major) and pricing (minor).
While some think Tesla will work hard to keep high margins, we must always remember the mission is to “accelerate the world’s transition to sustainable energy,” not to become the world’s most valuable company. These high margins mean that Tesla has the freedom to lower prices in certain regions to take or preserve market share, without endangering the health of the company. Of course, a better situation for the company is if the following levers can allow Tesla to continue to sell every car it makes and Tesla won’t have to reduce prices more than its costs decline and trim margins.
Bring back the Standard Range Model Y as they are still needed in the US and Europe, but Tesla has already released the Standard Range Model Y in China.
However, the use of large castings to massively reduce costs and simplify build complexity (in addition to many other innovations, including battery innovations) is a major lever. Tesla confirmed that the Model Y in both Texas and Berlin will have both the front and the rear castings as a single piece (as opposed to the Fremont and Shanghai Model Ys that only have a rear casting). Tesla also shared that the Model Y will use 4 680 cells in a structural battery pack, but that they are also preparing a way it can use the older cells in a non-structural battery pack as a backup. Tesla is learning to have several alternatives available, just in case plan A materials suddenly become unavailable or their supply becomes unexpectedly constrained.
The use of lithium iron phosphate (LFP) batteries will cut another $2 000 from the low-end Model Y’s cost. Elon gave further support using this demand lever. He mentioned that two-thirds of Tesla’s vehicles and virtually all of its stationary storage could use iron-based batteries because of the increased capability of newer LFP batteries. It seems the shortages of so many parts are pushing Tesla to more aggressively move to materials that are widely available today.
New Texas plant
There’s a saying in Texas that everything is bigger. New details about Tesla’s manufacturing plant just outside of Austin, known as Giga Texas, reveal that everything really is bigger in the Lone Star State, and Tesla is on its way to having the largest automotive manufacturing facility in the United States.
CEO Elon Musk detailed yesterday that the upcoming manufacturing plant just minutes outside of Austin will be “almost a mile long when complete,” making it so large that you likely have to see it to believe it. The automaker is nearing initial production at the plant, which is scheduled for later this year.
However, Giga Texas just may have the size to displace the massive Kia plant, putting it into second place if Musk’s calculations are true. After purchasing an additional 155 hectares of land adjacent to the already 850 hectares Tesla owned, the company is already planning to set its most advanced facility on the largest piece of land that a factory sits on in the country. 1 005 hectares will outfit the estimated 158 000 square metres that the main structure will sit on. The second facility will be an additional 84 000 square metres, with the final building tacking on another 93 000 square metres, swamping the Kia facility with an estimated 335 000 square metres of manufacturing floor space for Tesla to roam around on, a million square feet larger than the Georgia plant.