Tesla Delivered 486,532 Vehicles in Q3. Here's the Margin Math That Will Decide the Earnings Reaction.
Key Points
The EV maker’s total deliveries saw a slight sequential improvement over Q2’s number.
Its per-delivered-automobile profits fell during the second quarter, however, reflecting a combination of weaker pricing power and higher production costs.
Even a modest improvement -- or just an end to shrinking profit margins -- on these automobile-related numbers could offer enough hope for the bulls to latch onto.
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Electric vehicle company Tesla (NASDAQ: TSLA) can clearly manufacture automobiles en masse. It cranked out 464,391 EVs during the third quarter of this year, delivering 486,532 of them (versus analyst estimates of 461,974) after a bit of an inventory buildup back in Q1.
The question is, can the company make them en masse profitably enough? We won't know for sure until Oct. 21, when Tesla releases its fiscal Q3 results.
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We do already have a yardstick, however, that will help us gauge the health of those results. After the second quarter's disappointing drop in automotive gross profit to only $7,213 per delivered vehicle, Tesla just needs to prove that weakness was a one-off. Any measurable bounceback in that number should provide enough hope that the company's capable of containing its recently increased production costs while also reclaiming some of its recently lost pricing power.
Data source: Tesla. Chart by author.
Tesla doesn't report these per-car metrics. But it does disclose automotive-specific revenue and the cost of that revenue. During the second quarter, automobile-related revenue of $16.2 billion cost the company $12.8 billion, translating into an automotive gross profit of $3.4 billion on deliveries of 480,126 electric vehicles.
With a comparable number of deliveries (and unit production) seen during the third quarter, the upcoming automobile-related revenue figure should be no less than Q2's, while Q3's cost of automotive revenue should be no higher than the $12.8 billion figure reported for the second quarter. Ideally, the difference between the two numbers will widen at least a bit from Q2's $3.4 billion, thereby inflating the gross profit figure to $7,213 per delivered vehicle.
Of course, given Tesla's new focus on humanoid robotics and robotaxis, it remains to be seen to what degree investors will actually care about the margin math behind Q3's EV production and deliveries.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
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