Investor's Corner
Tesla Model Y production outpaced China Model 3 at launch helped by continued efficiencies
Tesla revealed a surprise profit in its Q1 2020 Update Letter, helped by efficiencies gained in the launch of its newest Model Y all-electric crossover.
As the company reeled in the widespread effects of the COVID-19 pandemic that took place in the same quarter as Model Y production began, Tesla was able to utilize shared production lines with the Model 3 to maximize output with little disruption to its Fremont factory. The company notes that they were able to build more Model Y vehicles within the first quarter of 2020 than the total number of Model 3 units produced in the first two quarters of 2017 when it launched.
As a result, Model Y is the first vehicle in its company history to be profitable in its first quarter of production.
Model Y production at Fremont in the first quarter of 2020 also exceeded the first-quarter production rate for the China-made Model 3 from its Giga Shanghai facility in China. “Additionally, we achieved positive gross margin for Model Y in its first production quarter,” the company’s Q1 2020 update said.
Tesla $TSLA Q1 2020 results: Beats on revenue, Model Y sets historic profit on launch https://t.co/0Z5Ym5t4eh
— TESLARATI (@Teslarati) April 29, 2020
Tesla began deliveries of the Model Y’s Long Range and Performance configurations in mid-March. The company revealed it had exceeded Wall Street’s delivery expectations when it released Q1 2020 figures in early April. Of the 88,400 cars Tesla successfully delivered to customers during the first three months of 2020, 76,200 were comprised of Model 3 and Model Y. It was unknown what the specific breakdown of Model 3 to Model Y vehicles was. However, judging by the fact that Tesla delivered the Model Y for just over two weeks when the figures were released, a vast majority of these vehicles would have been the Model 3.
Tesla plans to build an additional production line at its Fremont factory for the Model Y after the current lockdowns are lifted. The reopening of the Fremont plant was scheduled for May 4, but reports suggest Tesla may have to wait until June to begin producing more vehicles within the United States.
CEO Elon Musk has also stated that the location of the next US Cybertruck-focused Gigafactory will also produce Model Y crossovers for East Coast customers. The site of the Gigafactory has yet to be confirmed, but Musk has said that it will be located in the Central U.S. and closer to the East Coast.
An additional Gigafactory in the middle of the contiguous 48 states could shorten delivery wait times for customers who live on the opposite side of the country as the Fremont factory. Transporting Tesla vehicles to the Eastern seaboard can add days or weeks to a vehicle’s delivery window. The new plant will also help Tesla increase production numbers as a company. If Giga Berlin construction is finished before the new American Gigafactory, Tesla would have four production plants working together to produce high-performance electric vehicles for the world to drive.
Tesla stock (NASDAQ: TSLA) closed at an all-time high on Tuesday, jumping over 3 percent during the day and finishing at $489.88.
The price beats the previous record close, which was $479.86.
Shares have had a crazy year, dipping more than 40 percent from the start of the year. The stock then started to recover once again around late April, when its price started to climb back up from the low $200 level.
This week, Tesla started to climb toward its highest levels ever, as it was revealed on Sunday that the company was testing driverless Robotaxis in Austin. The spike in value pushed the company’s valuation to $1.63 trillion.
Tesla Robotaxi goes driverless as Musk confirms Safety Monitor removal testing
It is the seventh-most valuable company on the market currently, trailing Nvidia, Apple, Alphabet (Google), Microsoft, Amazon, and Meta.
Shares closed up $14.57 today, up over 3 percent.
The stock has gone through a lot this year, as previously mentioned. Shares tumbled in Q1 due to CEO Elon Musk’s involvement with the Department of Government Efficiency (DOGE), which pulled his attention away from his companies and left a major overhang on their valuations.
However, things started to rebound halfway through the year, and as the government started to phase out the $7,500 tax credit, demand spiked as consumers tried to take advantage of it.
Q3 deliveries were the highest in company history, and Tesla responded to the loss of the tax credit with the launch of the Model 3 and Model Y Standard.
Additionally, analysts have announced high expectations this week for the company on Wall Street as Robotaxi continues to be the focus. With autonomy within Tesla’s sights, things are moving in the direction of Robotaxi being a major catalyst for growth on the Street in the coming year.
Elon Musk
Tesla needs to come through on this one Robotaxi metric, analyst says
“We think the key focus from here will be how fast Tesla can scale driverless operations (including if Tesla’s approach to software/hardware allows it to scale significantly faster than competitors, as the company has argued), and on profitability.”
Tesla needs to come through on this one Robotaxi metric, Mark Delaney of Goldman Sachs says.
Tesla is in the process of rolling out its Robotaxi platform to areas outside of Austin and the California Bay Area. It has plans to launch in five additional cities, including Houston, Dallas, Miami, Las Vegas, and Phoenix.
However, the company’s expansion is not what the focus needs to be, according to Delaney. It’s the speed of deployment.
The analyst said:
“We think the key focus from here will be how fast Tesla can scale driverless operations (including if Tesla’s approach to software/hardware allows it to scale significantly faster than competitors, as the company has argued), and on profitability.”
Profitability will come as the Robotaxi fleet expands. Making that money will be dependent on when Tesla can initiate rides in more areas, giving more customers access to the program.
There are some additional things that the company needs to make happen ahead of the major Robotaxi expansion, one of those things is launching driverless rides in Austin, the first city in which it launched the program.
This week, Tesla started testing driverless Robotaxi rides in Austin, as two different Model Y units were spotted with no occupants, a huge step in the company’s plans for the ride-sharing platform.
Tesla Robotaxi goes driverless as Musk confirms Safety Monitor removal testing
CEO Elon Musk has been hoping to remove Safety Monitors from Robotaxis in Austin for several months, first mentioning the plan to have them out by the end of 2025 in September. He confirmed on Sunday that Tesla had officially removed vehicle occupants and started testing truly unsupervised rides.
Although Safety Monitors in Austin have been sitting in the passenger’s seat, they have still had the ability to override things in case of an emergency. After all, the ultimate goal was safety and avoiding any accidents or injuries.
Goldman Sachs reiterated its ‘Neutral’ rating and its $400 price target. Delaney said, “Tesla is making progress with its autonomous technology,” and recent developments make it evident that this is true.
Investor's Corner
Tesla gets bold Robotaxi prediction from Wall Street firm
Last week, Andrew Percoco took over Tesla analysis for Morgan Stanley from Adam Jonas, who covered the stock for years. Percoco seems to be less optimistic and bullish on Tesla shares, while still being fair and balanced in his analysis.
Tesla (NASDAQ: TSLA) received a bold Robotaxi prediction from Morgan Stanley, which anticipates a dramatic increase in the size of the company’s autonomous ride-hailing suite in the coming years.
Last week, Andrew Percoco took over Tesla analysis for Morgan Stanley from Adam Jonas, who covered the stock for years. Percoco seems to be less optimistic and bullish on Tesla shares, while still being fair and balanced in his analysis.
Percoco dug into the Robotaxi fleet and its expansion in the coming years in his latest note, released on Tuesday. The firm expects Tesla to increase the Robotaxi fleet size to 1,000 vehicles in 2026. However, that’s small-scale compared to what they expect from Tesla in a decade.
Tesla expands Robotaxi app access once again, this time on a global scale
By 2035, Morgan Stanley believes there will be one million Robotaxis on the road across multiple cities, a major jump and a considerable fleet size. We assume this means the fleet of vehicles Tesla will operate internally, and not including passenger-owned vehicles that could be added through software updates.
He also listed three specific catalysts that investors should pay attention to, as these will represent the company being on track to achieve its Robotaxi dreams:
- Opening Robotaxi to the public without a Safety Monitor. Timing is unclear, but it appears that Tesla is getting closer by the day.
- Improvement in safety metrics without the Safety Monitor. Tesla’s ability to improve its safety metrics as it scales miles driven without the Safety Monitor is imperative as it looks to scale in new states and cities in 2026.
- Cybercab start of production, targeted for April 2026. Tesla’s Cybercab is a purpose-built vehicle (no steering wheel or pedals, only two seats) that is expected to be produced through its state-of-the-art unboxed manufacturing process, offering further cost reductions and thus accelerating adoption over time.
Robotaxi stands to be one of Tesla’s most significant revenue contributors, especially as the company plans to continue expanding its ride-hailing service across the world in the coming years.
Its current deployment strategy is controlled and conservative to avoid any drastic and potentially program-ruining incidents.
So far, the program, which is active in Austin and the California Bay Area, has been widely successful.
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