Tesla announced their Q3, 2021 Earnings today. It was yet another record quarter and the first time Elon Musk was not on the call. Results had EPS: $1.44 GAAP; $1.86 NON-GAAP.
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A Record Q3, 2021 Earnings
All of this can be found on Tesla's investor earnings website
Tesla reported on Q3, 2021 earnings with these key metrics:
- Total Revenue: $13.757 billion
- EPS (GAAP): $1.44
- EPS (NON-GAAP): $1.86
Other key metrics included:
Cash
- Operating cash flow less capex (free cash flow) of $1.3 billion
- Net debt and finance lease repayments of $1.5 billion
- In totat, $164 million decrease in cash and cash equivalents to $16.1 billion, largely from debt and finance lease repayments
Profitability
- $2.0 billion GAAP operating income; 14.6% operating margin in Q3
- $1.6 billion GAAP net income; $2.1 billion non-GAAP net income (minus stock based compensation
- 30.5% GAAP Automotive gross margin (28.8% ex regulatory credits) in Q3
Operations
- Record vehicle production and deliveries
- Started roll out of FSD City Streets Beta to a wider population in October
Tesla does not need regulatory credits to be profitable. They have a 28.8% automotive gross margin without them, still much higher than any traditional auto maker.
In addition, automotive gross margin was 30.5% and we learned that there is capacity for 40 GWh from megapack with a new factory being installed. This compares with 3 GWh installed in the last 12 months. Clearly, Tesla is getting ready for some major energy storage growth. Tesla has a total energy storage deployments growth of 96% compounded annually over the last 4 years. Very impressive.
Financial Summary
Revenue
Total revenue grew 57% year over year, driven by growth in vehicle deliveries and growth in other areas of Tesla's business. Average selling price declined by 6% year over year due to reduced Model S and Model X sales.
Profitability
Operating income improved to $2 billion compared to the same period last year, resulting in a 14.6% operating margin. This profit level was reached while incurring stock based compensation expense attributable to the 2018 CEO award of $190 million in Q3, primarily driven by a new operational milestone becoming probable.
Operating income increased substantially year over year due to vehicle volume growth and cost reduction. Positive impacts were partially offset by average selling price decline, growth in operating expenses, lower regulatory credit revenue, additional supply chain costs, Bitcoin-related impairment of $51 million and other items.
Cash
Quarter-end cash and cash equivalents decreased to $16.1 billion, driven mainly by net debt and finance lease repayments of $1.5 billion, partially offset by free cash flow of $1.3 billion. Our total debt excluding vehicle and energy
product financing has fallen to just $2.1 billion.
Giga Factory Progress
US: California and Texas
Tesla's Fremont factory produced over 430,000 vehicles in the last four quarters and Tesla believes there is room for continued improvement. Model S production continued to ramp successfully and Model X production ramp and first deliveries have begun. Giga factory Texas is progressing as planned. Tesla in the process of commissioning equipment and fabricating our first pre-production vehicles.
China: Shanghai
China remain Tesla's main export hub. Production has ramped well in China, and Tesla is driving improvements to increase the production rate further. For standard range vehicles, Tesla is shifting to Lithium Iron Phosphate (LFP) battery chemistry globally.
Europe: Berlin-Brandenburg
Factory buildout remains on track with testing of equipment well underway. Tesla
expects to receive final permit approval before the end of this year.
Autopilot and FSD
Tesla had AI day which attracted a ton of AI talent. After presenting their vision for autonomy, they received an overwhelming number of applications. Also expanded FSD beta to more users with a 100 percent safety score to ensure a smooth rollout.
Battery and Powertrain
The 4680 in-house cell project continues to progress. Testing is happening on more and more battery packs and the results meet expectations. Front and read body castings are being produced at Giga Texas.
Energy Storage
Energy storage deployments increased by 71% year over year mainly driven by strong Megapack deployments. Tesla announced a new Megapack factory with a capacity of 40 GWh, which compares to just 3 GWh of deployments in the last 12 months. Tesla is very excited about the future of Megapack.
Solar Roof/Solar Retrofit
Solar deployments were 83 MW increasing by 46% year over year, with cash/loan purchases accounting for nearly all solar deployments. Solar Roof deployment more than double year over year and continued to grow sequentially. Tesla is making further cost improvements on the installation side, in order to increase the profitability of the energy division.
Tesla Insurance
Tesla rolled out safety score functionality which will be used for telematics insurance product. Tesla actively monitors braking, turning, tailgating, forward collision warnings, and forced autopilot disengagements in order to predict the probability of a collision. The system will continue to be improved.
Outlook
Volume
Tesla plans to grow our manufacturing capacity as quickly as possible. Over a multi-year horizon, we expect to achieve 50% average annual growth in vehicle deliveries. The rate of growth will depend on our equipment capacity, operational efficiency and the capacity and stability of the supply chain.
Cash
Tesla has sufficient liquidity to fund our product roadmap, long-term capacity expansion plans and other expenses.
Profit
Tesla expects operating margin to continue to grow over time, continuing to reach industry-leading levels with capacity expansion and localization plans underway.
Product
Tesla continues to target first Model Y production builds in Berlin and Austin before the end of the year. The pace of the respective production ramps will be influenced by the successful introduction of many new product and manufacturing technologies in new locations, ongoing supply-chain related challenges and regional permitting. Tesla is making progress on the industrialization of CyberTruck, which is currently planned for Austin production
subsequent to Model Y.
Conclusion
It was another record quarter for Tesla and earnings yet again beat expectations. Tesla is innovating in a variety of areas in the product design of their vehicles with over the air updates, FSD, the Tesla safety score, and eventual Tesla insurance.
Tesla is also innovating in the way they do manufacturing, with an automotive gross margin of 30.5% (28.8% without regulatory credits). That's very impressive. Tesla energy is also looking exciting and growing with the new 40 GWh Megapack factory being built.
I see Tesla continuing to have record quarters until we see electric vehicles and energy storage reach market saturation, at which point, perhaps Tesla Bot will start to take over for the growth in revenue and other areas.
What do you think of Tesla's Q3, 2021 earnings? Did they do a good job? What could they have done better?
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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, Facebook, LinkedIn and Instagram to stay in touch and follow his Tesla news coverage on Torque News.
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