Tesla Quarterly Updates: Q2, Q3, and Q4 2020 Briefing
Sources: Tesla Motors – First Quarter 2020 Shareholder Letter
Tesla Motors, Inc. – Second Quarter 2020 Shareholder Letter
Tesla Motors, Inc.– Third Quarter 2020 Shareholder Letter
Tesla Motors, Inc.– Fourth Quarter & Full Year 2020 Shareholder Letter
Executive Summary
Tesla experienced significant growth in vehicle production and deliveries throughout 2020, achieving record profitability and free cash flow. The company continued to invest heavily in expanding its global manufacturing footprint with new Gigafactories under construction, advanced its Full Self-Driving (FSD) technology, and made strides in its energy generation and storage business. Key highlights include increased Model 3/Y production, the launch of Model Y in Fremont, progress on new factories in Berlin and Texas, and the introduction of the Model S Plaid with record-breaking performance.
Key Themes & Important Facts
1. Financial Performance and Growth
Tesla demonstrated strong financial performance and sustained growth across Q2, Q3, and Q4 2020:
Free Cash Flow:Q2 2020: $418 million.
Q3 2020: $1.4 billion.
Q4 2020: $1.9 billion.
Annual 2020: $2.786 billion, a significant increase from $1.078 billion in 2019. (Q4 2020 Update)
Profitability:Q3 2020: GAAP operating income of $809 million with a 9.2% operating margin. GAAP net income was $331 million ($874 million non-GAAP). (Q3 2020 Update)
Q4 2020: GAAP operating income of $575 million with a 5.4% operating margin. GAAP net income was $270 million. (Q4 2020 Update)
Annual 2020: Achieved an operating margin of 6.3% and GAAP net income of $721 million, reversing a net loss of $862 million in 2019. (Q4 2020 Update)
"We expect our operating margin will continue to grow over time, ultimately reaching industry-leading levels with capacity expansion and localization plans underway." (Q3 & Q4 2020 Update)
Revenue:Total revenue in Q2 2020 was $6.036 billion (relatively flat QoQ). (Q2 2020 Update)
Total revenue in Q3 2020 increased to $8.771 billion (45% QoQ, 39% YoY). (Q3 2020 Update)
Total revenue in Q4 2020 reached $10.744 billion (46% YoY). (Q4 2020 Update)
Automotive revenue was the primary driver of growth. Regulatory credits also significantly contributed to revenue, reaching $1.580 billion in 2020, a 166% increase YoY. (Q4 2020 Update)
Cash Position: Cash and cash equivalents increased to $8.6 billion in Q2, $14.5 billion in Q3, and $19.384 billion in Q4 2020. This "sufficient liquidity to fund our product roadmap, long-term capacity expansion plans and other expenses." (Q2, Q3, Q4 2020 Updates)
2. Production and Deliveries
Tesla achieved record production and delivery numbers, largely driven by the Model 3/Y:
Total Deliveries:Q2 2020: 90,891 units.
Q3 2020: 139,593 units (54% QoQ, 44% YoY). (Q3 2020 Update)
Q4 2020: 180,667 units (61% YoY). (Q4 2020 Update)
"We have the capacity installed to produce and deliver 500,000 vehicles this year... Delivering half a million vehicles in 2020 remains our target." (Q3 2020 Update) Tesla successfully met this target.
"Over a multi-year horizon, we expect to achieve 50% average annual growth in vehicle deliveries. In some years we may grow faster, which we expect to be the case in 2021." (Q4 2020 Update)
Model 3/Y Focus: Model 3/Y production and deliveries significantly outpaced Model S/X, becoming the core volume drivers.
Q3 Model 3/Y production: 128,044 units (69% QoQ, 60% YoY). Deliveries: 124,318 units (55% QoQ, 56% YoY). (Q3 2020 Update)
Q4 Model 3/Y production: 163,660 units (88% YoY). Deliveries: 161,701 units (75% YoY). (Q4 2020 Update)
Inventory Management: Global vehicle inventory decreased from 25 days of supply in Q1 2020 to 14 days in Q3 and 11 days in Q4, indicating efficient demand-supply balance. (Q2, Q3, Q4 2020 Updates)
3. Manufacturing Expansion (Gigafactories)
Tesla is rapidly expanding its global manufacturing capabilities:
Fremont Factory (USA):Model 3/Y capacity increased to 500,000 units/year by the end of 2020 or early 2021 through upgrades including a second paint shop, a large die-casting machine, and general assembly line improvements. (Q3 2020 Update)
Launched and ramped Model Y in Fremont in 2020. (Q4 2020 Update)
Upgrades for new Model S and Model X powertrain, interior, and exterior. (Q4 2020 Update)
Gigafactory Shanghai (China):Model 3 production capacity increased to 250,000 units/year in Q3 2020. (Q3 2020 Update)
Model 3 production ramped to over 5,000 cars per week. (Q4 2020 Update)
Started production of Model Y less than a year after breaking ground on the expansion. (Q4 2020 Update)
Model 3/Y capacity reached 450,000 units/year by Q4 2020, with plans for further expansion in 2021. (Q4 2020 Update)
Reduced Model 3 price in China due to lower battery costs and increased local procurement. (Q3 2020 Update)
Gigafactory Berlin (Germany) & Gigafactory Texas (USA):Construction for Model Y capacity continued as planned, with deliveries projected to start from both locations in 2021. (Q3 & Q4 2020 Updates)
These new factories will feature "structural batteries leveraging in-house battery cells." (Q4 2020 Update)
The Texas Gigafactory will also produce Cybertruck, Tesla Semi, and Roadster (in development). (Q3 2020 Update)
4. Product Development & Technology
Significant progress was made in core technologies and new product introductions:
Full Self-Driving (FSD):Beta rollout started in October 2020. (Q3 2020 Update)
Multiple software updates were released to FSD City Streets beta testers, making the system "more robust, resulting in the widening of our user base." (Q4 2020 Update)
Development of the Dojo supercomputer continues, designed to process fleet video data and train neural networks rapidly. (Q4 2020 Update)
Battery Technology:Tesla's "Battery Day" highlighted a focus on five areas for improvement, projecting a total reduction of "56% $/kWh Cost Reduction*" and enabling the production of a "profitable $25,000 vehicle." (Q3 2020 Update)
Key innovations include a new "4680 cell" design with a tab-less solution for overheating, diversified cathode materials with in-house manufacturing and local sourcing, and "cell-vehicle integration" using "giga castings." (Q3 2020 Update)
Model S and Model X Updates:New Model S and X models were launched with redesigned battery modules and packs, Model 3/Y motor technology, and a heat pump for improved winter range. (Q4 2020 Update)
The "Plaid" version of Model S and X was introduced, featuring a tri-motor powertrain. "Model S Plaid is the fastest accelerating production car ever made with a 0-60 mph time of <2.0 seconds and a quarter mile in under 9.3 seconds, faster than a Bugatti Chiron." (Q4 2020 Update)
The Model S also achieved an EPA-tested range of 402 miles, "making it the first production EV in history to break the 400-mile range threshold." (Q2 2020 Update)
Tesla Semi: Deliveries of the Tesla Semi are expected to begin in 2021. (Q3 & Q4 2020 Updates)
5. Energy Business
The energy generation and storage segment experienced strong growth:
Storage Deployments:Q3 2020: 759 MWh deployed (81% QoQ, 59% YoY). (Q3 2020 Update)
Q4 2020: 1,584 MWh deployed (199% YoY). (Q4 2020 Update)
Annual 2020: Total battery deployments surpassed 3 GWh for the first time, an "83% increase compared to the prior year." (Q4 2020 Update)
Growth driven mainly by "Megapack, our utility scale storage product." (Q4 2020 Update)
Megapack became profitable for the first time in Q2 2020. (Q2 2020 Update)
Solar Deployments:Q3 2020: 57 MW deployed (111% QoQ, 33% YoY). (Q3 2020 Update)
Q4 2020: 86 MW deployed (59% YoY). (Q4 2020 Update)
Tesla continued to "scale our Solar Roof deployments" and "accelerate the growth of our energy business" by hiring more electricians and roofers. (Q3 2020 Update)
Autobidder: This "real-time energy trading platform... designed to maximize energy revenue from our utility scale batteries, continues to be an important part of our [energy] business." (Q2 2020 Update)
6. Infrastructure & Services
Tesla continued to expand its service and charging network:
Store and Service Locations: Grew from 433 in Q4 2019 to 523 in Q4 2020 (21% increase). (Q4 2020 Update)
Mobile Service Fleet: Expanded from 743 in Q4 2019 to 823 in Q4 2020 (11% increase). (Q4 2020 Update)
Supercharger Network: Supercharger stations increased from 1,821 in Q4 2019 to 2,564 in Q4 2020 (41% increase), with connectors growing from 16,104 to 23,277 (45% increase). (Q4 2020 Update)
Outlook (as of Q4 2020 Update)
Volume: Tesla plans to grow manufacturing capacity "as quickly as possible" and expects "50% average annual growth in vehicle deliveries" over a multi-year horizon, with 2021 anticipated to be a year of faster growth.
Cash Flow: The company maintains "sufficient liquidity to fund our product roadmap, long-term capacity expansion plans and other expenses."
Profit: Operating margin is expected to "continue to grow over time, continuing to reach industry-leading levels with capacity expansion and localization plans underway."
Product: Model Y capacity is being built at Gigafactory Berlin and Texas, with deliveries expected from both in 2021. Gigafactory Shanghai will continue to expand. Tesla Semi deliveries are also slated for 2021. Investment in the product roadmap remains significant.
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