The biggest highlight is profitability. In the third quarter, net profit reached $2.17 billion, up 17% year-over-year. Operating profit hit $2.72 billion, a 54% increase. Gross margin rose 1.9 percentage points to 19.8%. These figures surpassed Wall Street analysts’ expectations. In contrast, total revenue for the third quarter was $25.18 billion. Although this marked an 8% year-over-year increase, it fell slightly short of the market expectation of $25.5 billion and declined 1.2% from the previous quarter. Besides the financial data, Musk and Tesla executives shared key business developments during the earnings call. The most anticipated news is about the affordable car. Tesla plans to launch a cheaper model in the first half of next year, priced below $30,000. Additionally, the autonomous taxi, Cybercab, aims for mass production by 2026, targeting at least 2 million units per year. Musk also envisioned a sustainable future through humanoid robots and energy storage. Now, it remains to be seen if Musk can deliver on his promises. After four sluggish quarters, earnings exceeded expectations. On October 24, Tesla released its Q3 2024 financial report. Following the positive news, its stock surged over 12% in after-hours trading, despite a drop during the day. The report showed total revenue of $25.18 billion, an 8% year-over-year increase.
Tesla’s total revenue reached $20.02 billion in the third quarter. This figure represents a 2% increase year-over-year but falls short of the market expectation of $20.5 billion. The total includes $740 million from regulatory credits, up $185 million from last year. This marks Tesla’s second-highest regulatory credit revenue, following $890 million in the second quarter. Tesla profits from selling carbon credits to traditional automakers. This revenue significantly boosts Tesla’s profits. Excluding carbon credit sales and car rental income, Tesla’s actual vehicle sales revenue stands at $18.83 billion, below the market expectation of $19.5 billion. Tesla’s other two business segments showed growth. Energy production and storage revenue reached $2.38 billion, a 52% year-over-year increase. Service and other income totaled $2.79 billion, up 29%, mainly due to the expansion of the Supercharger network in North America, which now serves non-Tesla users. Additionally, revenue growth benefits from the recognition of FSD software income. This increase comes as Tesla rolls out FSD to the Cybertruck and introduces new features. Despite missing revenue expectations, Tesla’s improved gross margin led to better-than-expected profits. In the third quarter, Tesla reported a net income of $2.17 billion. The gross margin hit 19.8%, surpassing the analyst expectation of 16.8%. Operating profit reached $2.72 billion, well above the analyst forecast of $1.96 billion. Earnings per share stood at $0.72, a 9% increase year-over-year, exceeding the analyst expectation of $0.60.
Tesla reported better-than-expected profit data. The company attributed this to the third-quarter sales cost per vehicle dropping to a historic low of about $35,100. This marks a decline of around $2,000 compared to the same quarter last year. The reduction in sales costs likely stems from Tesla renegotiating its raw material procurement contracts. This lowered the costs of materials like batteries, which ultimately affected Tesla’s overall costs. On the expense side, Tesla’s third-quarter R&D expenses and sales and administrative expenses fell year-on-year by 10.5% and 5.3%, respectively. This decline likely relates to reduced personnel compensation from layoffs in the second quarter.
Tesla’s third-quarter financial data includes: operating cash flow of $6.255 billion, up 89% year-on-year; free cash flow of $2.74 billion, up 223%; and cash, cash equivalents, and investments of $33.648 billion at the end of the quarter, an increase of $2.93 billion from the previous quarter. Overall, Tesla achieved significant profits in the third quarter due to cost-cutting efforts, increased FSD revenue recognition, higher credit income, and strict control over R&D and sales expenses. However, analysts warn that after four consecutive quarters of disappointing earnings, investors have low expectations for the third-quarter report. The sustainability of Tesla’s profitability is a key concern moving forward. Affordable models will arrive next year. Currently, Tesla’s sales continue to grow. In the third quarter, Tesla produced 469,796 vehicles, up 9% year-on-year. Total vehicle deliveries reached 462,890, up 6%. Specifically, Model 3/Y deliveries totaled 439,975, a 5% increase. Other models delivered 22,915 units, up 43%. Notably, Cybertruck production increased quarter-on-quarter, achieving a positive gross margin for the first time this quarter. Cybertruck became the third best-selling electric vehicle in the U.S., following Model 3 and Model Y. For the future, Musk stated during the earnings call that Tesla’s car deliveries will grow slightly this year. Next year, deliveries will increase by 20% to 30%. Regarding new models, Tesla confirmed in the earnings report that it will start producing a series of new vehicles, including more affordable options, in the first half of 2025. Musk mentioned that the price of the new electric car will be below $30,000. However, the report revealed that the cost reductions for these new models will not be as significant as initially expected. This is mainly because these vehicles will use the next-generation platform and some parts of the existing platform. They will be produced on the same production line as current vehicles. While this saves some costs on building new production lines, the car manufacturing process will be more complex. This complexity will lead to higher costs for labor, electricity, and other expenses. Although the cost savings are not substantial, Tesla stated that using existing production lines for the new affordable models will fully utilize the company’s current maximum annual production capacity of nearly 3 million vehicles. This approach will allow Tesla to increase production by over 50% compared to 2023 without investing in new production lines. The financial report also mentions that Tesla’s Robotaxi product, Cybercab, will continue to use the revolutionary “Unboxed” manufacturing strategy.
The unboxed manufacturing strategy breaks the car into independent modules. These include the front and rear sections, chassis, and battery modules. Factories assemble these modules in different areas at the same time. Finally, they combine the modules into a complete vehicle. This approach significantly reduces costs.
Musk predicts that Cybercab will enter mass production in 2026. The goal is to produce at least 2 million Cybercabs each year, potentially reaching 4 million annually. Humanoid robots remain a distant vision. Autonomous driving, humanoid robots, and energy storage generate far less revenue than cars. These areas may better represent Musk’s imagined future. Regarding FSD, Musk revealed that FSD V13 will launch soon. It is expected to increase the intervention mileage by five to six times compared to version 12.5. From early 2023 to version 12.5, FSD’s intervention mileage increased by 100 times. Tesla aims for FSD to have a longer intervention mileage than humans by Q2 2025, making FSD safer than human drivers. Currently, Tesla offers Robotaxi services to employees in the San Francisco Bay Area. Employees can hail rides via an app, but safety operators still accompany them. The vehicles used are existing models like Model 3 and Model Y. Musk expects to launch Robotaxi services for the public in California and Texas next year. In terms of FSD training computing power, Tesla currently has the equivalent of 67,500 Nvidia H100 chips. By the end of October, it expects to add 21,000 more H100 chips, reaching a total computing power of 88.5 EFLOPS.
At the end of August this year, Lang Xianpeng, Vice President of Intelligent Driving R&D at Li Auto, revealed that Li Auto’s training computing power reached 5.39 EFLOPS. It is expected to exceed 8 EFLOPS by the end of 2024. According to Yu Chengdong, Executive Director and Chairman of Huawei’s Intelligent Automotive Solutions BU, Huawei’s cloud AI computing power reached 7.5 EFLOPS as of September 23, 2024. Tesla significantly surpasses domestic companies in computing power. Musk stated that Tesla is not limited by training computing power. The biggest limitation comes from the longer error intervals as FSD performance improves. Tesla needs more time to compare the advantages of two software versions. Regarding the humanoid robot Optimus, Musk painted a grand vision. He stated that Optimus could become the most valuable product in history. He believes Tesla is the only company with all the necessary conditions for mass-producing humanoid robots. Other companies either lack the AI brain or the capability for true mass production. Tesla’s energy business mainly divides into solar and energy storage. The solar business includes solar roofs and solar panels. Tesla launched Powerwall, Powerpack, and Megapack for homes, commercial buildings, and utilities. Currently, the Lathrop Megapack factory in California has an annual capacity of 40 GWh. Tesla’s second Megapack factory in Shanghai will start operations in Q1 next year with a capacity of 20 GWh, which will expand later. Musk stated that Tesla’s annual fixed energy storage deliveries will eventually reach several terawatt-hours. He believes that without reaching terawatt-scale, true sustainability is impossible. Musk sees the sun as the largest energy source. More storage devices will help humanity better utilize solar energy. He noted that humanity currently uses less than 1% of the Earth’s energy, indicating a long way to go. At the end of the earnings call, Musk summarized, “Tesla is committed to creating the future of energy, transportation, robotics, and artificial intelligence. Other companies focus only on managing short-term trends.” In the previous quarter’s call, Musk boldly claimed that Tesla would solve the self-driving problem. He advised anyone who doubts this should not hold Tesla stock. Maybe this is why Musk spoke for only twenty minutes at the Robotaxi launch. He wants the skeptics to sell their Tesla stocks. Then, he will surprise them with an unexpected earnings report. They will regret their decision.