Tesla’s Record First Quarter Driven by Higher Gross Margin and Lower Average Costs


Tesla’s record-breaking first quarter in 2021 was fueled by several things, but it all came down to the numbers, as usual. The automaker, which is coming off its best quarter in terms of deliveries and production figures, was able to score significant gains in automotive gross margin while lowering production costs. This ultimately led to a significant reduction in the average cost of its vehicles, especially compared to 2017 numbers when the Model 3 was just launched.

Q1 2021 Tesla (TSLA) earnings results: $ 10.39 billion in revenue, vs. $ 0.93 per share

The average price of Tesla cars has been reduced from around $ 84,000 to less than $ 38,000 due to “the launch of new products and new factories and the reduced mix of Model S and X,” the company said in its update letter for the first quarter of 2021 and its shareholder file. . However, more contributions to the company’s ever-improving financial spreadsheet were made as gross margins improved and production costs fell.

Tesla said in his shareholder game:

“As our vehicles’ ASP declined in the first quarter, our automotive gross margin increased sequentially, while our costs decreased even faster. Reducing the average cost of the vehicles we produce is essential to our mission. In 2017, when we started production of the Model 3, our average cost per vehicle across the fleet was around $ 84,000. Due to the launch of new products and factories and the reduced mix of Model S and Model X, our average cost fell to less than $ 38,000 per vehicle in the first quarter. “

Tesla has always had impressive gross margins for its cars. One of the most recent reports of an impressive gross margin, which fuels profitability, dates back to January when Guosen Securities analyzed the Model Y. The study broke down the total gross margin and found it to be 29 , 4%, or about three times the industry average which is between 8 and 10% for luxury cars.

We have already talked about it saying:

“According to the financial firm based in Shenzhen, China, Tesla’s Chinese Model Y costs just 237,930 ($ 36,852) to produce. However, its selling point gives Tesla a gross margin of 29.4% with a price tag of 339,900 ($ 52,646.25).

Of course, reducing costs and improving margins will help the finances of any business. When you’re dealing with cars, you need demand, and Tesla has a lot of it with its Model 3s and Ys. In fact, the Model 3 was the world’s best-selling premium sedan with just three and a half years. years of production, overtaking long-time and popular leaders in the luxury vehicle segment, such as the BMW 3 Series and Mercedes-Benz E-Class.

Tesla remains profitable for the seventh consecutive quarter, extending the company’s already impressive record. Additionally, Tesla topped consensus estimates with first-quarter revenue of $ 10.389 billion, non-GAAP earnings per share of $ 0.93, and non-GAAP net income exceeding $ 1 billion. dollars for the first time in the company’s history.

Tesla’s Record First Quarter Driven by Higher Gross Margin and Lower Average Costs


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