Tesla reports its first annual profit

Tesla made a profit of $270 million in the fourth quarter of 2020, bringing the year’s profits to $721 million. It’s Tesla’s first annual profit. The company posted an $826 million loss in 2019.

The strong financial results were aided by record vehicle production and deliveries in the fourth quarter of 2020. As we reported earlier this month, Tesla delivered 180,000 vehicles to customers in the quarter, bringing the year’s total just shy of Tesla’s 500,000-vehicle goal.

As a result, Tesla’s revenue has zoomed upward. Tesla’s Q4 2020 revenue was $10.7 billion, up 46 percent from the $7.4 billion Tesla took in a year earlier.

This strong growth wasn’t enough to satisfy Wall Street. Tesla’s stock fell 3.3 percent in after-hours trading to $835. Tesla’s market capitalization is still above $800 billion—far more than any other automaker.

Tesla’s profits were made possible by $1.58 billion in regulatory credits it earned in 2020. A number of jurisdictions, including California and the European Union, have laws requiring carmakers to achieve ambitious emissions targets or mandating that a certain fraction of carmakers’ fleets be electric. Companies that exceed the targets get credits they can sell to other automakers that fall short. All of Tesla’s vehicles are electric, so Tesla always has extra credits to sell.

Back from the brink

Three years ago, Tesla was teetering at the edge of bankruptcy as the cost of scaling up Model 3 production tested the limits of Tesla’s fundraising ability. Tesla has now put those days firmly in the rearview mirror. At the end of 2020, the company had $19.4 billion in cash in the bank, up from $6.3 billion a year earlier. This was mostly thanks to two $5 billion rounds of fundraising conducted in 2020—one in September and the second in December.

Tesla is planning for continued growth in the new year. Tesla says it has the capacity to produce 600,000 vehicles per year at its main factory in Fremont and another 450,000 vehicles in Shanghai. Tesla says that new factories in Berlin and Austin, Texas, will be ready to start producing the Model Y this year. Tesla is also hoping to start deliveries of the long-delayed Tesla Semi in 2021.

If all goes according to plan, Tesla will be able to produce at least 1 million vehicles in calendar year 2021—more than double this year’s figure.

Tesla doesn’t expect to maintain that torrid growth rate over the longer term but says it is aiming to increase vehicle deliveries by at least 50 percent per year over the next few years.

Tesla has also delivered steady growth in other areas of its business. Over the last year, the number of super-charger stations has grown 41 percent, from 1,821 to 2,564. Tesla delivered 3GWh of fixed storage capacity in 2020, almost double the amount the company shipped in 2019.