Tesla Profitability Surfaces — Let’s Reflect On Tesla’s Insane Progress

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The #1 story coming out of Tesla’s quarterly shareholder letter was widely considered to be the fact that Tesla (TSLA) was profitable in the third quarter. This is the first time in a few years that Tesla has had a profitable quarter, and it is a strong sign of financial efficiency and overall corporate health — especially at this stage in the company’s life. The momentous occasion inspired me to look back at Tesla’s history a bit, and compare Tesla of a few years ago to what Tesla has become.

If a leaked email from Elon was to be believed, Q3 profitability was likely but certainly not a guarantee. It was also painted as Tesla’s last chance at profitability before Model 3 production ramps up. However, one of the first things Elon mentioned on the conference call last night was that Tesla expects Q4 to be a profitable quarter as well when excluding non-cash, stock-based compensation — and maybe even when including non-cash, stock-based compensation. He said the latter was just “a chance,” but that the company had “a shot” at such profitability even in Q4.

Ramping up Model X production, improving vehicle reliability, greater and greater operational efficiency, and better deals on supplier parts all contributed to the Q3 profitability. More of the same should be coming in Q4.

As I wrote above, though, I encourage all of you to use this opportunity to reflect a little bit on Tesla’s history instead of just playing the quarter-to-quarter number crunching game. Below are just a handful of points I’ve pulled out of the archives (especially the Q3 2011 Tesla shareholder letter) in order to help you do so.

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→ 5 years ago, in Q3 2011, Tesla had its Model S Beta reveal, with customers riding in a Model S for the first time.

Just a handful of years later, in Q3 2016, Tesla delivered 16,047 Model S sedans to customers around the world and 8,774 Model X SUVs.

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→ 5 years ago, in Q3 2011, Tesla delivered a whopping 184 cars (Roadsters, of course) to its early customers.

Yes, that means that Tesla went from delivering 184 cars in a quarter to delivering 24,821 cars in a quarter within just 5 years.

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→ 5 years ago, in Q3 2011, Tesla had 6,500 cumulative reservations for the Model S, with 1,150 net new reservations made in that quarter.

Again, in Q3 2016, more than 16,000 Model S sedans were actually shipped — nearly 10,000 more than the total reservation number 5 years ago, and nearly 15,000 more than the Q3 2011 reservation additions. Meanwhile, another 8,774 Model X SUVs were also shipped to customers. (I’d play with some percentage growth figures here, but it would just be too insane.)

Do you remember how much certain members of the media and auto world were hyping the “limits of Model S demand” and even claiming there was “declining” demand?

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→ 5 years ago, in Q3 2011, Tesla was fighting misperceptions about the Roadster’s driving range and the ease of charging due to an entertainment prank on Top Gear that misled consumers.

In Q3 2016, Tesla had 4,461 individual Superchargers located at 715 Supercharger stations around the world, and a further 3,222 destination chargers with 5,547 connection points supplemented the Superchargers. Of course, charging at home is still super easy and is how drivers charge their Teslas most of the time.

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→ In Q3 2011, some gasmobile model (most likely the Mercedes S-Class, but I don’t have enough interest to look it up) was the top-selling large luxury sedan in the US.

In Q3 2016, the Tesla Model S dominated the large luxury sedan category with ~32% of market sales.

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→ Tesla was founded in 2003. In just ~13 years, it has come to dominate the large luxury sedan market, is ramping up production of an SUV which is likely to do the same in the large luxury SUV market, is prepping mass production of the Model 3 (and maybe Model Y) in all corners of the company, has started shipping all of its cars with full self-driving hardware, has become a major energy storage player and is on the verge of becoming a major solar energy player, and was profitable in Q3 2016.

What did you achieve by the time you were 13?

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That’s pretty insane, imho. Call me a fanboy, but it just makes sense to be a fan of companies that are changing the world for the better.

Of course, the points above are just a speckling of how much Tesla has grown and improved in the past 5–13 years. Feel free to add some more perspective if you are inspired to do so. (Naturally, Tesla haters are also free to hate on Tesla’s progress — that’s been a pretty popular pastime in the past several years, and it doesn’t seem to be losing its glamor.)

Top image: Elon Musk at Tesla Gigafactory 1. Photo taken by Steve Jurvetson (CC BY 2.0 license).