Well, I don’t believe it

Tesla rebounds from rocky start to year with surprise profit of $143m

I don’t know why I don’t believe it but that’s just because I’ve not bothered to work out what the fiddle is yet.

Note that I’m not claiming illegality or lying. Just that I expect there to be something interesting in the accounts – say, possibly and as an example – about revenue recognition or summat.

26 thoughts on “Well, I don’t believe it”

  1. Surely the fiddle is that the whole thing has been supported with billions in taxpayer dollars? Pretty sure I could turn a £1 million ‘profit’ out of selling random pebbles to people called Dave if I started with £1 billion from the government.

  2. I’m as sceptical as you, but I have to admit you do see a fair few Tesla cars being driven, at least in Surrey.

    I see a lot of Nissan Leaf and Renault Zoe electrics hatchbacks too, but they’re mostly parked. My gut feeling is that wives buy e-hatchbacks for local journeys, and husbands buy Tesla for long commutes.

    The biggest worry has to be the finance companies. After a four year lease, a petrol car is still good for another decade. But electric cars suffer concerns about battery longevity, so I can’t see their prices holding up well on the second-hand market. This means that whoever is financing the cheap PCP deals on electric cars is holding the hot potato.

  3. Yeah. You go from $1.1bn loss to $143m profit? Let’s see if you can repeat that next quarter, shall we before people start thinking this is a golden company.

    The fact is, most people are very conservative about car buying, preferring established brands, generally. And most people aren’t that bothered about electric. Everyone likes low-sacrifice surface eco. Reusing plastic bags. Tell people they have a range of 250 miles and have to spend £40K on a car that looks like crap and they won’t do it.

  4. Their revenues 2018 were $21bn. If the revenue this year is around $35-40bn, then a profit of $140m is rather small, don’t you think? I’d worry more about the cashflows in and out. They won’t be paying dividends any year soon

  5. Surely the fiddle is that their product is only viable because of various governments leaning on people to drive these over-engineered milk floats.

  6. Tesla have a massive backlog of orders. All it takes is for them to get manufacturing up to the scale/quality so that they can actually get product out the door to a standard that punters are willing to accept and they can’t help but make a profit, especially when most of their customers are being subsidised by some government somewhere.

    I believe they’re currently manufacturing faster than new orders are coming in, so the question is whether they can still make a profit once they’ve fulfilled their backlog and are running at steady-state. The other question is whether governments will continue to be willing to cough up subsidies as the rate of electric car buying purchases increases?

  7. Electric cars won’t make much of an impact until it can compete price-wise with my 20-year-old petrol car that I paid £450 for, gets 400 miles on a single “recharge” for about £200 a month/25p a mile all in (fuel + tax + insurance + mot + repairs + maintainance).

  8. Tim, it would help if you would tell us what you are looking at. The 143m profit seems to be the figure for net income in Q3 this year on revenue of 5353m.The first 2 quarters racked up losses of roughly 1.1bn.

    Comparable figures for Q3 last year were net income of 311m on revenue of 6099m.

    Ebitda percentages in both quarters are pretty much the same. Changes from quarter to quarter look intriguing but it will be hard to disentangle the production ramp up costs. Difficult to see what worries you in these numbers particularly. Revenue deferrals are happening, so they don’t appear to be taking everything up front.

    After a swift look, Operating cash-flow seems stable quarter on quarter. Investment is ramping up but people are still buying stock.

    Why are you suspicious of Q3 this year?

  9. @jgh – In the not too distant future, Tesla et al will not need to compete with your car. It will be legislated out of existence.

  10. @MC: in that case, I will be legislated out of employment and any form or mobility.

    My car was having its brake pads replaced on Monday, so I used public transport instead. Four hours driving was replaced with 12 hours by bus+train+waiting in stations.

  11. Dennis, He Who Has A BSBA in Economics

    Haven’t looked at the numbers (and won’t) because I’ve always felt Elon Musk was a con man… But two words do spring to mind: Channel stuffing.

  12. Dennis the Parochial Peasant

    Difficult to see what worries you in these numbers particularly.

    What worries me is that they are coming from Elon Musk.

    Telsa has had some serious turnover amongst their senior financial managers over the past several years. CPAs don’t voluntarily leave senior positions with a Fortune 500 company for the fun of it. Add Musk’s own well documented propensity to play fast and loose with the truth and what you get is…

  13. “The other question is whether governments will continue to be willing to cough up subsidies as the rate of electric car buying purchases increases?”

    Once they realise how much fuel duty & VAT they are no longer collecting things will soon change…

  14. It should be remembered that electric cars are far more harmful to the environment than ICE cars. They are not zero emission, the electricity has to come from somewhere. Also the batteries are made from stuff that mostly can’t be recycled. Hardly anyone would buy them if it were not for government subsidies.

  15. Hmmm…..

    I see Tesla have announced V3.0 of the solar shingle …. I also see some comments pointing out / claiming that V1 was a fake – purportedly the display units at the investor hoodwinking session launch party / bunfight didn’t even have wires / connectors but one assumes that recreational intoxicants were available courtesy of the Feds who were desperate that Solar City didn’t declare full on insolvency.

  16. Tesla owner, driver and enthusiast; however also an accountant.

    Profit “fiddle” is likely due to Tesla releasing Smart Summon in the USA this quarter. This is part of the Enhanced Autopilot (EAP) and Full Self-Driving (FSD) suite of features that many owners have paid for in advance. Due to it not being available when they bought the revenue would have been put onto the balance sheet as it can’t be recognised until the service is provided.

    So release Smart Summon and you can release the portion of the FSD that relates to Smart Summon (and pretty much all remaining EAP) deferred revenue to the P&L. This will therefore pump up profit for the quarter.

    As an accountant you learn pretty quickly that the P&L is almost totally unimportant, it is really just where the balancing items go. The important number is operating cashflow (preferably less scheduled debt repayments, and maintenance capex). For Tesla this quarter this too was much better than expected so it is a good set of results even when you take the non-cash, deferred revenue release into account.

  17. Good point James, it would be interesting to see how much deferred revenue there is on a car for undelivered features, obviously not something you find with the traditional manufacturers.
    Depending on how it’s structured can almost be pure profit, likely some final development costs to offset is all.
    Also they mentioned a change in the lease v purchase makeup of revenue which can have timing issues involved.

  18. It is a software service upgrade so will be pretty much pure profit to EBITDA, then a small amount of amortisation. But yes, most of the deferred revenue will go down to the bottom line!

    As the FSD features get rolled out it is likely to recur for a while too, plus Smart Summon etc is really just US at the moment (EU rules are very strict on this, due to a bit of pressure from some Germans) so there will be more as they roll out across the world.

    Personal opinion, and I admit to being biased, is that Tesla has turned a corner now that Model 3 production is running. Order books remain good for the 3, Chinese factory almost running too, small crossover (Model Y) coming next year, truck about to be released, refreshed Model S and X on their way. Plus Semi and solar at some point in the not too distant future.

    I always thought that Tesla would get into real trouble but be bought out by VW or Amazon/Apple but now I think that they may be here for the long run!

  19. “I always thought that Tesla would get into real trouble but be bought out by VW or Amazon/Apple but now I think that they may be here for the long run!”

    With Musk in charge, we will only know in hindsight.

    “It’s tough to make predictions, especially about Tesla.” ― Yogi Berra

    “But electric cars suffer concerns about battery longevity, so I can’t see their prices holding up well on the second-hand market.”

    Depreciation on Tesla’s is not bad, similar to other cars. Depreciation on Nissan Leaf is CATASTROPHIC!

    >70% in TWO YEARS !!!

  20. With Musk in charge, we will only know in hindsight.

    Totally agree. When I bought the car it was a bit of a gamble, but I liked it and the car wouldn’t get any worse if Tesla went under (just no better). At the time there weren’t any superchargers in NZ so I wasn’t even relying on Tesla for charging (we have a pretty good network of 50kW chargers all over the country here, but these are now getting a bit crowded due to the numbers of EVs on the road). About a year ago I was worried but, by that time, I thought that the Tesla brand and technological head-start was such that there would be many a legacy car manufacturer who would be happy to buy them up.

    Depreciation on Tesla’s is not bad, similar to other cars. Depreciation on Nissan Leaf is CATASTROPHIC!

    The lack of active thermal battery management on Nissan Leafs (Leaves?) mean that the batteries frequently overheat, especially when fast charging. This destroys their chemistry quickly and their longevity suffers accordingly.

    I’ve had my Tesla for a bit over 2 years and the range has died off by about 5% in that period. This is along the expected rate (5% in 2 years, another 5% in the following 8 years or so). Thermal management helps considerably! There are also a few after-market places that can swap out cells individually, but I don’t think that any of these are recognised under Tesla’s battery warranty!

    We have had my wife’s BMW i3 for 18 months and I haven’t noticed any degradation at all on that one. Chemistry and Physics dictates that there must be some but it really is unnoticeable.

    I hasten to add that, even with 2 EVs, I’m not some weirdy beardy grass munching vegan who knits his own homemade yoghurt. I just like the tech, like the way they drive, and like not paying for petrol!

  21. “Nissan Leafs (Leaves?)”

    OT but related: Why isn’t the plural of “chief” “chieves?”

    Kansas City Chieves?

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