Tesla on Wednesday released its first full-year profit, an 18-year achievement.
The electric carmaker, which was founded in 2003, said it earned $ 721 million in 2020, in contrast to a loss of $ 862 million in 2019, although the pandemic has hurt sales and production in the United States. The company earned $ 270 million in the last three months of the year, compared with $ 105 million in the same period in 2019.
But fourth-quarter earnings were below analysts’ expectations, and Tesla’s shares fell about 5 percent in extended trading on Wednesday.
Tesla’s move towards profitability is an important turning point for the company and an auto industry that has seen few new successful players in the past few decades. The company’s success was made possible in large part by increased sales in China and Europe, and by the addition of a fourth car, the Model Y, which appears to have become its best seller in the United States.
Last year was “a decisive year for us on many levels,” Tesla Chief Executive Elon Musk said in a conference call with analysts. “Despite a challenging environment, we have reached an important milestone in the production and delivery of half a million cars.”
Tesla’s sales increased by about 36 percent to 499,550 cars in 2020. The increase was driven by a factory in Shanghai that opened a year ago and is now starting to produce Model Y, as well as its predecessor, Model 3 China is the world’s largest market for electric and conventional cars.
The company posted revenue of $ 10.7 billion in the fourth quarter, an increase of 45.5% over the same period last year. Its full-year revenue rose to $ 31.5 billion, from $ 24.6 billion in 2019.
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But Tesla said its operating profit margin, a measure of how much money it earns for every dollar of sales, fell from 9.2% in the third quarter to 5.4% in the fourth quarter. The gross profit margin in its automotive business was 24.1%, the lowest level in any quarter in 2020.
Tesla’s revenue and financial results were helped by the sale of $ 401 million in emission credits in the fourth quarter to other automakers that need them to meet regulatory standards.
Musk suggested that the company could sell more than 800,000 cars in 2021, by expanding production from its factory in China and opening a third factory under construction near Berlin. The company is also building a factory near Austin, Texas, which is expected to start producing cars by the end of the year.
In a statement, the company predicted that sales in 2021 would grow by more than 50 percent, which implies a total sales of at least 750,000 cars. The company also said it expects average annual sales growth of around 50 percent in the coming years, and said deliveries of its semi-truck will begin before the end of the year.
But the automaker also faces challenges. Tesla makes less money than some of its larger, more established rivals. In the third quarter alone, General Motors generated $ 4 billion in profit – more than five times Tesla’s total for the full year. GM will release its fourth quarter earnings on February 10
In Europe, Tesla is facing increasing competition from Volkswagen, Renault, Hyundai, Daimler and other manufacturers that have introduced better and more affordable electric cars. Some of these models are selling more than Tesla’s Model 3, which was once the best-selling electric car in the region.
Although Tesla does not divide its sales by region or country, it appears that the company’s sales in the United States declined in 2020, mainly because of the coronavirus pandemic. But the company also saw sales of Model 3 stagnate as deliveries of Model Y increased, according to data on new car registrations from California, Texas and 20 other states analyzed by Cross-Sell, a research firm market share.
Competition in the United States is also heating up. Ford Motor recently started delivering the Mustang Mach-E, an electric sport utility vehicle, and Volkswagen says it will launch an electric SUV, the ID.4, in March. Both are eligible for federal tax credits that no longer apply to Tesla cars, making them more affordable than the Model Y.