Tesla took another shot at its skeptics by delivering solid second-quarter earnings — and its fourth consecutive quarterly profit — even amid the coronavirus pandemic.
The California-based automaker also announced on Wednesday that it will move ahead on plans to set up a second U.S. assembly plant, awarding the prize to Austin, Texas. The Lone Star State had been battling it out in a multi-state bidding war. Tesla already operates two car plants, including its original factory in Fremont, California, and another in Shanghai that opened last year. A third facility near Berlin is under construction.
Tesla picks Texas for its Cybertruck factory.
The Gigafactory will employee thousands of Texans & be a cornerstone for next generation innovation.
It’s been fun to get to know you.
Welcome to Texas. pic.twitter.com/PsnfaEUHaz
— Greg Abbott (@GregAbbott_TX) July 22, 2020
In a teleconference with analysts and reporters, Tesla CEO Elon Musk rolled off a list of things he said Tesla has in store, including new vehicles and other lines of business that could substantially boost future revenues.
“I’ve never been more excited or optimistic about the future of Tesla in the history of the company,” he said, adding, “There’s so much to be excited about it’s almost hard to fit into this call.”
Tesla officials pointed to a number of things that helped drive Tesla’s fourth consecutive quarterly profit, including not only its new Model Y and the China plant, but also its expanding presence in the energy storage business.
“Tesla Energy will be bigger than automotive,” Musk said during the company’s quarterly earnings call on Wednesday night, pointing to a shift to sustainable sources such as wind and solar.
Looking forward, Musk outlined plans for an expanded line-up of battery-electric vehicles, with the company set to launch production of its heavy-duty Semi truck next year. It is also moving ahead with the development of its Cybertruck pickup. In the longer term, Musk hinted, it may be “reasonable to assume” Tesla will add a compact vehicle, “and probably a higher capacity passenger vehicle.” He did not offer additional details on Wednesday night, however.
Tesla has indicated it sees substantial opportunities to further expand vehicle production and sales, but Musk succinctly outlined his approach to growing the business by saying, “We want to be, like, slightly profitable and maximize growth and make the cars as affordable as possible.”
“If anything, our cars are not affordable enough,” he acknowledged. “We want to fix that.”
Musk and other Tesla executives pointed to various steps the company is taking to accomplish that, including modifications that will simplify the manufacturing process.
They did not directly address ongoing concerns about Tesla quality, however. Tesla has been taking sharp criticism for issues such as defective rear seats with the Model Y that, according to a recent study by J.D. Power, left the automaker in last place when it comes to vehicle quality among nearly three dozen different brands competing in the U.S. market.
But the issue of addressing manufacturing problems was the subtext of several comments made by Musk and his management team during the quarterly earnings call.
Along with adding new models to the line-up, Tesla sees a number of other ways to expand its revenues. Zach Kirkhorn, the company’s chief financial officer, said that it is looking at ways to generate subscription revenues using its over-the-air communications technology. Musk also said that as Tesla moves forward with plans to launch a fully autonomous drive system, that “is worth at least $100,000 per car,” though he didn’t explain how that would be generated.
Coming up with a fully hands-free version of the current Tesla Autopilot system, Musk said, is his most immediate and biggest priority, adding that the conversion could happen “overnight” using over-the-air updates and could make Tesla’s vehicles “five times” more valuable.
Musk told his audience he is already testing the technology out on his own vehicle and it is “really, profoundly better than people realize. It’s amazing. It’s almost getting to the point where I can go from my house to work without intervention.”
Four straight quarters of profit now make Tesla eligible for inclusion in the S&P 500 index for the first time, likely ensuring the company will become part of many Americans’ retirement savings plan.