How Tesla was able to generate profit in the pandemic- squeezed quarter?
Tesla on Wednesday reported a profit of $104 million in the second quarter of 2020. Despite the shutdown of factories in California, Fermont for about seven weeks due to national lockdown. This was a surprise even for the analyst. As a result, Tesla generates a profit for the fourth consecutive quarter for the first time in the history of the company. Now Tesla has selected a site for his next factory in Texas, the U.S. The factory will produce Tesla’s new electric pickup truck, the cyber truck, and the new electric truck, along with Model 3 and Model Y – which it already make at the factory in San Francisco.
2019 was a breakout year for Tesla. Tesla was benefited from its new factory near Shangai where the production began last year and was able to deliver 122,000 cars. They debuted the two new vehicles including the Uber-cool cyber truck. Tesla is also working on its new versions of Model S and X this could be the broken cover by the end of 2020.
Tesla kept its finances in black by selling 90,000 vehicles in the last quarter even though the country is dealing with the pandemic. However, its revenue in the second quarter fell by 5% to $6 billion. Elon Musk, CEO of SpaceX, said that the company will deliver 500,000 vehicles by the end of 2020.
Tesla seems to be working better with the pandemic as compare to some other automakers. However, Tesla wasn’t purely profitable by its sales, it has also sold regulatory credits in the past quarter worth $428 million. This is nearly four times as many as credits as it sold in the same quarter last year. Its overall revenue was down by 30% year-over-year but still, they managed to grow and now the company’s run of profitability quarters may put it in the vaunted S&P 500. This index could trigger an upward push by stimulating a surge in demand.
As a result, the company’s stock price rose to a record of $1,100 taking the company’s market cap to an incredible $209 billion in the last few months. This happens due to the unprecedented stock market activities due to the new release of Model Y and the swirl of other factors. That puts Tesla roughly $6 billion ahead of Toyota making Tesla the most valuable automaker in the world.
Sales for the second quarter dropped as the economy shut down and job cuts which result in cutbacks on spending. For nearly two months, the factories at Fremont and other places were forced to halt the production. But the company was still able to achieve profit despite tremendous difficulties in this quarter. To succeed in the second quarter of this year, was not that easy. Elon Musk fought an intense public battle with the local officials over the stay-at-home order, eventually, he reopened the factory in Fremont violating the order and said that “if anyone must be arrested, that would be me.” as a result, Multiple workers at Fremont factory was tested positive for coronavirus, though the company disputes and said how many and it comes about to be fewer than 10 people contracted to the novel coronavirus while at work.
If Tesla will be able to maintain the same stability – keep Covid-19 spreading through its workforce – and do not have to deal with any other shutdowns, then they will be able to generate very strong profitability in the second half of 2020.
It was used to be difficult to bet that Tesla will be able to accomplish so much. Even Elon Musk said that he is not best with goal-setting. Tesla has been doing just that as of late. It met the low ends of the delivery goal. The company posted another profit in the first quarter. They were able to launch the new Model Y crossover within six months ahead of schedule.
Tesla even finished the first quarter of 2020 with $8.1 billion in cash – the most in company history. Maybe Tesla is in its early stages to become an automaker giant all over the world. To generate business in this crisis is the most crucial part. It is possible that Elon Musk may surprise us once again.
