Tesla's profitability is about to go through the roof. What is going on that is going to cause this? We'll share that now.
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Tesla Profitability Is About To Go Through the Roof
Tesla's latest earnings call had a lot of information if you look past Elon Musk talking so much about Tesla Bot. And by the way, Tesla Bot is very important. Tesla's growth and numbers are showing that Tesla is at the early increase of an S curve and the profit margins are about to get better.
One of these reasons is the 4680 batteries. If the Model Y gets a 10% increase, then the battery would go from 330 to about 360. That would mean less charging cycles for a longer lasting batter. Tesla might instruct owners to not charge in order to get the battery to last longer.
The current nickel batteries require driving from 20% to 80% charge. However, with the new LFP batteries - and possibly the 4680 batteries, there might be a different set of instruction to go to a lower end and higher end percentage. Something like 5% to 95% or more may be what Tesla recommends.
If the 4680 batteries are cheaper for Tesla to make and you don't need as many of them in a vehicle, that is going to increase Tesla's profitability. The could even raise the prices of their cars even more while it will cost Tesla less to make them. And Tesla is going to be making more and more cars. Tesla reached over 900,000 cars produced in 2021 and the number for 2022 is likely to be 1.6 million or more. Each of those cars produced is very profitable for Tesla.
What Will the Vehicles With the 4680 Battery Demand Be?
It's not going to be too long for Tesla to reach 1 million annual Model Y vehicles. Tesla doesn't need to introduce any lower cost models, like the $25,000 vehicle. Tesla is going to forget about this vehicle while the demand is so high. The Model Y is and should be Tesla's focus.
Every single estimate for Tesla going forward in the future sees a cost reduction in vehicles. But so far, this hasn't been the case. Tesla's vehicle price are actually going up - due to demand. And I think that the price of Tesla's vehicles is going to keep going up for some time - as long as the demand curve is greater than what Tesla can produce.
Tesla is likely to hit a 5 million annual delivery in 2024 or 2025. With the increased technology from the 4680 batteries and more Model Y vehicles being sold, Tesla is going to 10x at least their current profit margin. That would cause Tesla to start earning $25 billion each quarter in GAAP net income, which would mean a $100 billion a year GAAP net income by 2025. This doesn't even include FSD.
I think the decrease in Tesla vehicles is not going to happen. EV's are in the beginning states of the S curve of adoption. It won't be until the latter end of EV adoption that we start to see vehicles decrease in price - or even increase slower in price.
A Profit Machine
Once FSD is set to be widespread and on every vehicle, that will be even more income Tesla will realize. And this doesn't even take into account Tesla using vehicles as robotaxis. That's going to take Tesla to an even higher level of profit.
There's 4 waves of profits that Tesla is going to grow substantially from:
Tesla vehicles
Tesla energy
Tesla robotaxis
Tesla bot
Each of these are worth trillions of dollars to Tesla and I would even say that each is worth orders of magnitude more than the prior. If Tesla vehicles are worth $5 trillion, energy is $10 trillion (even though it is tiny right now), and robotaxis is $50 trillion, and Tesla bot is $500 trillion in market cap.
These seem like crazy numbers and I would have a hard time believing them, but I see how fast Tesla is growing and how much profit margin Tesla is generating. Tesla is truly a once in a generation company.
Is Tesla's profitability about to go through the roof? If not, when and will it happen in the future?
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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News.
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The minute the Model S
The minute the Model S surfaced the future of the product was clear. I ordered an S85D in 2013 and started buying shares in 2014. Traded the volatility, bought incrementally and held after that. Little experience of share trading but the plan was good and Musk was and is perfect for the job. Fundamentals, vertical integration, work ethic, young enough and old enough, innovation, list goes on and on. Blow the algorithms- look at the setup. Take the trouble to look how it all fits together. The partnership that matters is that between TSLA and its customers. Sideline everybody else. They are Nothings. Feel sad for the legacy workers but it is the fault of lazy managers, misguided Unions and and Politicians who only know politics. Thank you Elon and your great Staff. Glad you are shareholders. It is all as it should be but hardly ever is.