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Tesla (TSLA) Q3 2024 Earnings Review (Jul-Sep 2024)

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The EV giant Tesla reported Q3 2024 results after the bell on October 23. Despite slightly missing market expectations in revenue, gross margins and operating margins beat analyst estimates. The company also announced the timing for its lower-priced vehicle production in H1 2025, sending the stock soaring nearly +12% in after-hours trading.

Tesla (TSLA) Q3 2024 Financial Results

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  • Revenues: $25.18B (YoY +8%)
    • Automotive $20.02B (YoY +2.0%)
    • Energy and storage: $2.38B (YoY +52.4%)
    • Services and other: $2.79B (YoY +28.8%)
  • EPS: $0.72 (YoY +9%)
  • Deliveries: 463K (YoY +6%)
  • Gross Margin: 19.8% (YoY +1.9pts)

Tesla delivered an encouraging Q3 2023 earnings report, breaking free from the downturn of previous quarters and demonstrating clear signs of recovery. Revenue reached $25.182B, marking a 7.85% YoY growth and accelerating momentum for two consecutive quarters. Notably, operating profit surged 54% YoY to $2.717B, significantly exceeding analyst expectations of $1.962B.

The company-wide gross margin hit 19.84%, surpassing the previous year’s 17.9% and last quarter’s 18%, handily beating market expectations of 17%. This figure marks the strongest performance since 2023, showcasing Tesla’s exceptional cost management capabilities.

Automotive

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Tesla produced 469,796 vehicles and delivered 462,890 units in Q3, representing a 6.4% YoY delivery growth. While slightly below market expectations of 463,900 units, the return to a positive growth trajectory remains noteworthy. Days of Supply increased from 16 days YoY to 19 days, indicating a slight uptick in inventory pressure.

The company demonstrated remarkable cost control, reducing the Cost of Goods Sold (COGS) per vehicle to a historic low of $35,100. This achievement is particularly significant as it directly impacts profitability. Despite ongoing pricing pressure, Tesla maintained healthy profit margins.

Tesla’s global annual production capacity now exceeds 2.35 million units, with solid performance across major factories:

  • Shanghai Gigafactory: Annual capacity exceeding 950K units, achieving record-low COGS per vehicle
  • Berlin Gigafactory: Reduced COGS QoQ, continuing cost structure optimization
  • U.S. Factories: Increased production of the refreshed Model 3, with Semi truck production planned for late 2025

Energy and Services

The energy division posted quarterly revenue of $2.376B, achieving remarkable YoY growth of 52.41%, with gross margins reaching an all-time high of 30.5%. Total energy storage deployment reached 6.9 GWh, representing impressive YoY growth of 72.5%, maintaining strong growth momentum.

The services segment generated revenue of $2.79B, posting 28.81% YoY growth. Services gross margin reached a record 8.82%, marking the highest profitability in this segment’s history.

Tesla (TSLA) Q3 2024 Earnings Call

Musk highlighted that Tesla stands as the only profitable EV manufacturer globally. While this claim warrants verification, it reflects the brutal reality of the EV market: advantages in economies of scale and cost control often determine business viability.

Tesla has reached a critical inflection point. Q3 results marked several vital milestones: COGS per vehicle dropped to a historic low of $35,000, signaling a significant breakthrough in manufacturing efficiency. Musk acknowledged that reducing vehicle production costs by 20% presents greater challenges than designing new models or building new factories. This perspective indicates Tesla’s shift from pure scale expansion to operational efficiency optimization.

Tesla’s annual production capacity is approaching 3 million units, which is impressive. More notably, the company’s cautious approach to capacity expansion suggests it can achieve 50% growth over 2023 levels (approximately 2.7 million units annually) without adding new production lines. This strategy signals a pivot from aggressive expansion to more efficient capacity utilization.

Next-Generation Vehicle

Musk presented a unique perspective on traditional affordable vehicles. He termed a basic $25,000 car “meaningless and foolish,” asserting that the future belongs to autonomous vehicles. This viewpoint challenges conventional automotive industry thinking and suggests Tesla may focus on fully autonomous-capable products rather than purely low-cost vehicles.

Tesla claims their next-generation vehicle production platform will achieve 5x higher efficiency than traditional factories. This platform will support existing and new model production, demonstrating Tesla’s manufacturing innovation. The new vehicle, scheduled for H1 2025 launch, targets a sub-$30,000 price point after incentives, balancing cost control with technological innovation.

Tesla plans to begin volume production of the Semi truck by late 2025, targeting business customers focused on Total Cost of Ownership (TCO). PepsiCo Semi drivers reportedly refuse to return to conventional trucks, validating the product’s competitive advantage. Tesla is also developing a dedicated FSD system for Semi, enhancing its value proposition.

FSD and AI

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Tesla achieved significant autonomous driving milestones. FSD accumulated 2 billion miles driven, with half attributed to FSD V12. Notably, the upcoming FSD V13 promises revolutionary improvements: a thousand-fold increase in miles between human interventions compared to early 2023. This acceleration demonstrates Tesla’s advantages in AI training.

Tesla’s Texas Gigafactory deployment of AI computing clusters, projected to reach 50,000 H100 GPUs by October’s end, establishes unprecedented computing power. This computational capacity eliminates AI training constraints, laying the groundwork for FSD and Optimus advancement. Musk emphasized Tesla’s position as a global leader in inference computing efficiency, a crucial advantage in future AI competition.

The Tesla-xAI relationship highlights unique advantages in the AI sector. The companies maintain distinct AI development focus: xAI targets superintelligence, while Tesla concentrates on autonomous driving and robotics AI. This division enables Tesla to maintain technological independence while benefiting from broader AI advances.

Musk positioned Tesla’s Optimus as the world’s most advanced humanoid robot, with Tesla uniquely possessing both AI expertise and mass production capabilities. This advantage positions Tesla to establish automotive-like dominance in robotics potentially.

Robotaxi

Tesla has developed and internally tested its Robotaxi application, targeting California and Texas launches next year. Musk expressed confidence in securing regulatory approval for unsupervised paid ride services in 2024. While optimistic, this timeline reflects Tesla’s commitment to autonomous driving commercialization.

The planned 2026 Cybercab launch represents a major business model pivot. With production costs around $25,000 per unit and a targeted annual capacity of 2 million units (optimistically 4 million), these figures reflect Tesla’s mobility market ambitions.

Tesla’s “unboxed” manufacturing strategy for Robotaxi, resembling LEGO-style assembly, projects 40% reduced manufacturing footprint and 30% faster production speed. This innovative approach could revolutionize automotive production methodology.

Energy and Services

Tesla’s energy business accelerates growth. Lathrop Megafactory achieves 200 Megapack weekly production, reaching 40 GWh annual capacity. With Shanghai’s additional 20 GWh capacity, Tesla approaches 100 GWh yearly energy storage capacity. This segment projects faster 2024 growth than automotive.

Powerwall installations achieved consecutive quarterly records, reinforcing Tesla’s residential energy storage market leadership. Annual energy storage deployment projections indicate doubling YoY, demonstrating robust momentum.

Review and Analysis

Tesla stands at a pivotal inflection point. Following 1.809 million deliveries in 2023, conservative 0.5% YoY growth projects Q4 2024 to surpass 500,000 quarterly deliveries for the first time, reaching 524,000 units. This milestone’s significance extends beyond scale, demonstrating Tesla’s capacity optimization capabilities.

Automotive gross margins returning above 20% validate pricing strategy success while highlighting exceptional cost control. Energy and services divisions achieving record margins further strengthens overall profitability. This comprehensive financial improvement signals Tesla’s evolution toward robust operational efficiency.

Energy storage demand continues to outstrip supply, demonstrating strong market traction. Service segment margin improvements reflect ongoing operational optimization. These business lines’ success progressively realizes Tesla’s diversification vision.

Tesla’s growth narrative enters a new chapter. Musk’s 20%-30% annual growth target, while ambitious against the industry backdrop, proves rational under deeper analysis. This target rests on two pillars: The cybertruck capacity ramp and the launch of a new affordable vehicle.

Vehicles

Cybertruck performance exceeded market expectations. As America’s third best-selling EV, achieving breakeven ahead of schedule merits attention. This validates Tesla’s manufacturing breakthroughs and establishes a solid foundation for 2025’s 100,000-unit delivery target.

Tesla’s product line strategy is undergoing a significant transformation. The first confirmation of multiple affordable models reflects deep market demand understanding. Post-incentive pricing below $30,000 demonstrates a skillful balance between market share pursuit and brand positioning maintenance.

FSD

Tesla’s claim of 1000x intervention-free mileage improvement with FSD V13 stands remarkable. While requiring validation, this ambitious declaration demonstrates Tesla’s autonomous driving breakthrough commitment. Markets will closely monitor this commitment’s realization as a potential indicator of Tesla’s autonomous driving leadership.

Musk’s commitment to free HW3 hardware upgrades for early adopters transcends technical considerations. Core user loyalty maintenance through this approach ensures brand reputation while establishing a solid market foundation for future innovations. This strategic decision reflects an understanding of early adopters’ crucial role in brand development.

Tesla’s autonomous driving progress commands attention. Plans for 2025 Robotaxi service launches in California and Texas present an accelerated timeline. Tesla demonstrates both technical capability and determination of autonomous technology commercialization.

Optimus

Optimus’s breakthrough in hand design demonstrates Tesla’s expansion into new revenue streams. Tesla’s mass production capability may emerge as its primary competitive advantage, particularly in humanoid robotics.

Notably, the humanoid robotics competitive landscape presents distinct regional variations. While Western competitors may struggle to match Optimus’s cost-effectiveness, Chinese manufacturers’ strong manufacturing capabilities and cost advantages position them to launch competitive alternatives potentially. This competitive dynamic may drive Tesla toward more flexible product development and market strategies.

Conclusion

Tesla approaches multiple critical business inflection points. Post-earnings revelations highlight several vital developments: better-than-expected margins across three major segments, detailed affordable vehicle plans, FSD advancement, Robotaxi roadmap, Cybertruck’s path to profitability, and projected automotive sales growth. Following the trough since Q3 2023, Tesla signals spring growth emerging from winter decline. Further Federal Reserve rate cuts could provide additional tailwinds.

From traditional auto manufacturing to autonomous driving services, energy storage systems, and humanoid robotics, Tesla redefines its role in technological innovation. Despite intensifying competition, particularly from Chinese manufacturers, Tesla’s unique technological capabilities and economies of scale secure an advantageous positioning in this global technological revolution.

Strengths and Opportunities for Tesla (TSLA) Q3 2024

  • Free cash flow returns to robust levels
  • Automotive sales resume positive growth with stabilizing margins
  • Successful 4680 battery production amid favorable battery market conditions
  • Positive FSD V12 reception with significant V13 improvements anticipated
  • Substantial GPU computing power widening autonomous driving competitive gap
  • Progressive Robotaxi business development
  • Smooth Optimus progress with massive market potential and limited competition in mass production
  • Strong margin performance in energy and services segments with multi-year growth runway
  • Strategic import controls on Chinese EVs in Western markets
  • Reduced EV investment from traditional Western automakers
  • Federal Reserve initiating rate cut cycle

Weaknesses and Threats for Tesla (TSLA) Q3 2024

  • Market saturation is approaching for existing models
  • Intense competitive pressure from Chinese EV manufacturers
  • CEO Musk’s political positions present ongoing brand risk
  • Potential reduced EV incentives under potential Trump presidency

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