Tesla Posts Profit in Q4 2018, Outlines Challenges for 2019

Coming off of a profitable third quarter, Tesla announced it once again achieved a profit in the fourth quarter of 2018.

Tesla achieved a GAAP net income of $139.5 million last quarter. This is up from the $675.4 million loss the company suffered in the last quarter of 2017. Operating income remained stable compared to the third quarter of 2018 at $414 million. Total revenue during Q4 came in at $7.2 billion, up from $3.3 billion during the last quarter of 2017.

According to CNBC, fourth-quarter earnings were short of analysts’ expectations, and shares dropped 2.5 percent in after-hours trading. Factors that negatively impacted Tesla’s earnings include higher import duties on parts from China, lower prices on the Model S and Model X in China, declining revenue from the sale of regulatory credits, and the new less expensive Model 3 with the mid-range battery pack.

In many ways, the Model 3 was a success story in the previous quarter. Production increased throughout the quarter, and December was the highest-volume month ever for the electric sedan. More than 63,350 copies of the Model 3 were delivered to customers in North America in the final quarter. Coming out of challenges building the Model 3, Tesla reduced labor hours per Model 3 by about 20 percent compared to Q3 and 65 percent in the second half of the year.

For the new quarter, Tesla expects to deliver slightly fewer copies of the Model S and X compared to the same quarter a year ago. This is because Tesla is presuming that demand had increased recently due to the phase-out of the federal EV tax credits. And as the Model 3 expands into Europe and China, Tesla is expecting Model 3 deliveries to be lower in the first quarter because of vehicle transit times to those markets. Model 3 production will increase in the quarter, however, Tesla says.

In 2019, Tesla expects to deliver a total of 360,000 to 400,000 vehicles, which would signal an increase of about 45-65 percent from last year. It is expecting to maintain a positive GAAP net income in every quarter beyond Q1. In Q1, it is giving an optimistic target of a “very small GAAP net income.” On an earnings call Wednesday, chief financial officer Deepak Ahuja announced his retirement. Ahuja was Tesla’s CFO from 2008-2015, but rejoined the company in that same role in 2017 when previous CFO Jason Wheeler resigned abruptly. This latest development follows a number of other executive departures at Tesla. Ahuja will be replaced by Zach Kirkhorn, the company’s current vice president of finance.

Tesla also threw in a tidbit about the upcoming Model Y, saying it will start tooling for production of the vehicle this year. According to Tesla, the cost of the production line for this vehicle “should be substantially lower than the Model 3 line” in Fremont since it will share about 75 percent of its components with the entry-level sedan.

Source: Tesla, CNBC

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