How Tesla Has Become Profitable
Tesla Inc. has been fluctuating between $400 and $450 a share, but has yet to sell its cars for a profit. It is the fourth consecutive quarter that Tesla would not be profitable without regulatory credit sales Tesla sells regulatory credits to other auto makers who fail to manufacture enough “green” cars to meet federal standards. (It sold $397 million in regulatory credits in the third quarter, which produce $331 million in profit total for the quarter).
“Once again, auto regulatory credit revenue was another major driver of the beat,” wrote Garrett Nelson, an analyst with CFRA, in a brief note to clients. Through the past nine months Tesla has collected $1.18 billion in credit sales (double 2019).
“We have sold these credits, and will continue to sell future credits, to automotive companies and other regulated entities who can use the credits to comply with emission standards and other regulatory requirements,” Tesla said.
Last week Tesla was approaching a valuation of $400 billion. To produce anywhere near enough profit to deserve that valuation, Tesla must stop relying on regulatory credits to produce profit. Tesla dropped the price of the luxury Model S to $69,420 (interesting number). And stated it could bring prices down further overall.
“If the car is too expensive, than people won’t have enough money in their bank account, they can’t buy it no matter what the value proposition,” Musk said. “It is important to lower prices so people can literally just have enough money to buy it.”