Tesla returned to profit and revenue growth in the third quarter, riding a rising trend for electric vehicles (EVs) worldwide and a turnaround in its energy business. Its stock closed up nearly 22 percent.
Most of the gains came in the company’s energy and storage business, which was up by 52 percent. This was followed by a 29 percent rise in services and a 2 percent rise in its automotive business.
“We delivered strong results in the third quarter with growth in vehicle deliveries both sequentially and year on year, resulting in record third-quarter volumes,” the company management said in a statement accompanying the release of the financial results. “We also recognized our second-best quarter of regulatory credit revenues as other OEMs [original equipment manufacturers] are still behind in meeting emissions requirements.”
In addition, company management boasted about the rise of profit margins and free cash flow. Gross margins were 19.8 percent, up by 1.95 percent from a year earlier; operating margin was 18.8 percent, up by 3.23 percent; and free cash flow was $2,742 billion, up by 2.23 percent from a year earlier.
Management attributed these higher margins to efficiency gains that lowered vehicle production costs.
“Our cost of goods sold (COGS) per vehicle came down to its lowest level ever at ~$35,100,” management said. “In order to continue accelerating the world’s transition to sustainable energy, we need to make EVs affordable for everyone, including making total cost of ownership per mile competitive with all forms of transportation. Preparations remain underway for our offering of new vehicles—including more affordable models—which we will begin launching in the first half of 2025.”
Cost cutting is part of the company’s efforts to lower vehicle prices and reach trice-sensitive consumers, where it is beginning to feel pressure from domestic and foreign competition.
Sidharth Ramsinghaney, director of corporate strategy and operations at Twilio, sees the company’s third-quarter performance as a validation of its strategy.
“Tesla’s third-quarter 2024 performance signals a fundamental shift in their business model maturity,” he told The Epoch Times via email. “The reduction in the cost of goods sold to $35,100 per vehicle isn’t just a number—it’s a validation of their vertical integration strategy and manufacturing excellence.”
In addition, Ramsinghaney believes that the stabilization of gross margins above 19 percent demonstrates that Tesla has successfully navigated through its price-adjustment phase and is emerging stronger.
“This is particularly impressive given the current competitive pressures in the EV market,” he said.
Meanwhile, Ramsinghaney cheered the company’s hefty gross margins in its energy division.
“Tesla’s energy division achieving a 30.5 percent gross margin is a watershed moment,” he said. “It proves their diversification strategy isn’t just about revenue growth—it’s about building high-margin business segments that can drive sustained profitability.”
Still, on a closer examination, Tesla’s net profit is lower than it appears in the income statement, with the details buried in the first footnotes. For instance, the first footnote says that net earnings do not include stock-based compensation (SBC).
To find that number, equity analysts must examine the company’s cash flow statement, which reports that SBC was $285 million for the fourth quarter, up from $144 in the second quarter.
However, at least in Thursday’s trading session, Wall Street doesn’t seem to care about the details. Instead, it paid attention to Tesla’s return to growth and bullish guidance, with shares trading 21.92 percent higher, to close at $260.48.
These gains helped turn around the high-tech sector, which sold off during the regular trading session on Oct. 23, ahead of Tesla’s earnings report.
In addition, Wall Street isn’t concerned, as yet, about Tesla’s domestic and overseas challenges in the EV market, either. Tesla faces growing competition from General Motors and Ford on the domestic front. Both companies have developed their EV models, offering alternatives to consumers who want to stick with domestic choices.
Overseas, Tesla faces challenges in China and could turn from an asset to a liability for Tesla, from a market with significant potential gains to a market with substantial losses, owing to enormous pressure from scores of domestic EV makers.
These domestic EV producers are government-backed entities by local government investment funds, strategic industry funds, or state-owned enterprises in the automotive industry, meaning that Tesla is competing against China Inc.
