Oct 21, 2020 - Economy & Business

Tesla continues longest profitability streak in company history

A Tesla 3 electric vehicle displayed in a showroom in Beijing, China

A Model 3 on display in a Tesla showroom in Beijing. (Photo: VCG/VCG via Getty Images)

Tesla reported its fifth consecutive quarter of profitability — raking in $331 million, the most money since the run began — alongside a record number of deliveries of its electric cars.

Why it matters: Tesla has become the world's most valuable automaker. It's on the longest money-making streak in company history, despite disruptions from the COVID-19 pandemic.

Details: Tesla said it had the "capacity" to produce and deliver 500,000 cars by the end of the year, per a release, but achieving the closely watched goal it set before the pandemic hit "has become more difficult."

  • The company said meeting its objective hinges in part on ramping up production of the Model Y SUV, as well as production at its factory in Shanghai.
  • Tesla has delivered 318,350 vehicles so far this year.

Of note: The automaker made $397 million from the sale of regulatory emission credits to other automakers, a move that's helped boost revenue and profit at Tesla for years.

  • That's over 5% of Tesla's automotive revenue in Q3. It's also more than double what it made from those sales this time last year.
  • The company wouldn't have been profitable this quarter without the revenue from the credit sales, as Reuters notes.

What to watch: Legacy automakers — like General Motors, which also has a stake in electric vehicle upstart Nikola — are getting more aggressive about their electric vehicle ambitions. Other would-be competitors are getting more attention from investors, with a slew of electric vehicle companies going public via SPACs.

  • Yes, but: None of those competitors has impacted Tesla's hold on the electric vehicle market. The "existential question" for Tesla is whether "that status quo is going to continue," Joseph Osha, an analyst who covers Tesla at JMP Securities, tells Axios.

Between the lines: Questions remain about whether Tesla will gain inclusion in the S&P 500 index, opening it up to the roughly $11 trillion worth of investment funds that track the index, per Bloomberg.

  • The company met the final requirement for eligibility — four consecutive quarters of profitability — last quarter. But in a surprising move, Tesla was passed over when the index's committee switched up components in September.
  • Tesla's stock price has run up an eye-popping 409% this year. The stock rose as much as 4% after the company reported earnings.
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