Tesla announces new Austin factory after pulling in $104 million profit in Q2
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Tesla CEO Elon Musk. Photo: Paul Hennessy/SOPA Images/LightRocket via Getty Images
Tesla CEO Elon Musk announced on an earnings call Wednesday that the company would build a second U.S. factory on 2,000 acres near Austin, Texas, where it plans to employ more than 5,000 workers, according to AP.
Why it matters: The company needs a second manufacturing site to build its fast-growing portfolio of electric vehicles like the Cybertruck pickup and Tesla Semi truck, as well as additional capacity for its mainstream Model 3 sedan and newly introduced Model Y crossover utility.
The big picture: Tesla earned $104 million net profit during the second quarter, despite the coronavirus-related shutdown of its main factory in Fremont, Calif., sending its shares up 6% in after-hours trading.
- It was Tesla's fourth quarterly profit in a row, clearing a hurdle to be included in the the S&P 500 stock index of the largest U.S. companies and signaling a new phase of maturity for the electric carmaker.
Yes, but: Tesla also warned the ongoing pandemic makes the future hard to predict.
- "Although we have successfully ramped vehicle production back to prior levels, it remains difficult to predict whether there will be further operational interruptions or how global consumer sentiment will evolve in the second half of 2020," the company said in a letter to shareholders.
Key takeaways:
- Tesla revenue fell to $6.04 billion from $6.35 billion a year earlier, partly because because the company is selling more of its lower-priced Model 3 and Y vehicles.
- About 8% of its revenues came from selling regulatory credits to other automakers, up almost 300% from the same period a year ago.
- The higher income from emissions credits, along with savings on employee salaries during the factory shutdown, helped Tesla turn a net profit for the quarter.
- Deliveries totaled 90,891 vehicles, down from 95,356 in the second quarter of 2019.
- Despite the COVID-19 shutdown, Tesla produced 82,272 vehicles in the second quarter, compared to 87,048 in the same period last year. Inventories were tight during the period, at just 17 days' supply.
What to watch: Tesla's free cash flow fell 32% during the period, but the company ended the quarter with $8.6 billion cash and said it should have sufficient liquidity to fund future products, factory expansions and other expenses.
- Tesla is building factory capacity in China and Germany to begin Model Y deliveries in both regions in early 2021.
- Deliveries of electric Tesla Semi trucks will begin in 2021.
The bottom line: "We have the capacity installed to exceed 500,000 vehicle deliveries this year, despite recent production interruptions," Tesla said. "While achieving this goal has become more difficult, delivering half a million vehicles in 2020 remains our target."
Go deeper: Why Tesla is the company of the moment
