Defying investor expectations, Tesla reports Q1 profit

Regulatory credit sales and streamlined operations helped drive the electric vehicle maker to its third consecutive quarterly profit; CEO Elon Musk rages against the coronavirus lockdown

Image: Tesla

Tesla (TSLA) surprised investors yet again, recording an unexpected profit during the first quarter of 2020, even as the coronavirus pandemic slowed production and sales of the company’s electric vehicles.

The first quarter of  2020 “was the first time in our history that we achieved a positive GAAP net income in the seasonally weak first quarter,” Tesla said in a letter to investors posted on Wednesday. “Despite global operational challenges, we were able to achieve our best first quarter for both production and deliveries.”

Also on Wednesday, during  a call with investors, CEO Elon Musk doubled down on his criticism of the U.S. coronavirus shutdown, describing the shelter-in-place orders as “fascist.” Many small businesses will fail, and lawmakers, he said, need to “give people back their goddamn freedom.”

Tesla has the capacity “to exceed 500,000 vehicle deliveries” in 2020, according to the investor’s letter. But with the flagship Fremont, California, factory still under lockdown, it’s unclear whether the company will be able to act on that capacity, now that the San Francisco Bay area has extended shelter-in-place orders through the end of May.


Responding to those orders, Musk on Tuesday sent out a FREE AMERICA NOW tweet to his 33.4 million followers.

The Q1 earnings report, however, mostly exuded optimism. Beating Wall Street estimates, Tesla recorded an adjusted profit of $227 million, or $1.24 a share, compared to the 28 cents per share investors had predicted. Quarterly sales clocked in at $5.99 billion, up from $4.54 billion a year ago.  

The company recorded automotive revenues of $5.1 billion. Automotive gross margin increased to 25.5% in the first quarter, versus 22.8% over last year. Deliveries of the Model Y represented “the first time in our history that a new product has been profitable in its first quarter,” Tesla said.

A 13% reduction in operating expenses compared to first quarter 2019 contributed to profitability, as did revenue from regulatory credits that Tesla receives for selling electric vehicles.


Overall, Tesla delivered about 88,000 cars in the first quarter of 2020, compared to 97,000 and 112,000 vehicles in the third and fourth quarters of 2019.

Tesla financial summary, Q1 2020

Commercial vehicle customers did get some disappointing if unsurprising news. Tesla said it is postponing deliveries of the long-awaited Tesla Semi Truck until 2021. During its Q4 2019 earnings call, the company had pegged 2020 as the year customers would take possession of the electric-powered big rigs.

During the earnings call with investors, Musk said the company will have more news to share on Battery Day, “one of the most exciting days in Tesla’s history.” The event will likely be held around the third week of May, either in Texas or California, depending on coronavirus regulations.

“It is difficult to predict how quickly vehicle manufacturing and its global supply chain will return to prior levels,” the investor’s letter stated. “Due to the wide range of potential outcomes, near-term guidance of net income and free cash flow would likely be inaccurate.  We will again revisit our 2020 guidance in our Q2 update.”

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