CNN: Tesla's Net Profit 'Doesn't Come From Selling Cars'
Published on February 01, 2021 at 04:04AM
"Tesla posted its first full year of net income in 2020 — but not because of sales to its customers," reports CNN: Eleven states require automakers sell a certain percentage of zero-emissions vehicles by 2025. If they can't, the automakers have to buy regulatory credits from another automaker that meets those requirements — such as Tesla, which exclusively sells electric cars. It's a lucrative business for Tesla — bringing in $3.3 billion over the course of the last five years, nearly half of that in 2020 alone. The $1.6 billion in regulatory credits it received last year far outweighed Tesla's net income of $721 million — meaning Tesla would have otherwise posted a net loss in 2020. "These guys are losing money selling cars. They're making money selling credits. And the credits are going away," said Gordon Johnson of GLJ Research and one of the biggest bears on Tesla shares... Tesla also reports other measures of profitability, as do many other companies. And by those measures, the profits are great enough that they do not depend on the sales of credits to be in the black... Its automotive gross profit, which compares total revenue from its car business to expenses directly associated with the building the cars, was $5.4 billion, even excluding the regulatory credits sales revenue... But the debate between skeptics and devotees of the company whether Tesla is truly profitable has become a "Holy War," according to Gene Munster, managing partner of Loup Ventures and a leading tech analyst. "They're debating two different things. They'll never come to a resolution," he said. Munster believes critics focus too much on how the credits still exceed net income. He contends that automotive gross profit margin, excluding those sales of regulatory credits, is the best barometer for the company's financial success. "It's a leading indicator," of that measure of Tesla's profit, he said. "There's no chance that GM and VW are making money on that basis on their EVs..." Tesla shares are now worth roughly as much as those of the combined 12 largest automakers who sell more than 90% of autos globally. What Tesla has that other automakers don't is rapid growth... Tech analyst Gene Munster also tells CNN "Something most people can agree on... Electric vehicles are the future. I think that's a safe assumption."
Published on February 01, 2021 at 04:04AM
"Tesla posted its first full year of net income in 2020 — but not because of sales to its customers," reports CNN: Eleven states require automakers sell a certain percentage of zero-emissions vehicles by 2025. If they can't, the automakers have to buy regulatory credits from another automaker that meets those requirements — such as Tesla, which exclusively sells electric cars. It's a lucrative business for Tesla — bringing in $3.3 billion over the course of the last five years, nearly half of that in 2020 alone. The $1.6 billion in regulatory credits it received last year far outweighed Tesla's net income of $721 million — meaning Tesla would have otherwise posted a net loss in 2020. "These guys are losing money selling cars. They're making money selling credits. And the credits are going away," said Gordon Johnson of GLJ Research and one of the biggest bears on Tesla shares... Tesla also reports other measures of profitability, as do many other companies. And by those measures, the profits are great enough that they do not depend on the sales of credits to be in the black... Its automotive gross profit, which compares total revenue from its car business to expenses directly associated with the building the cars, was $5.4 billion, even excluding the regulatory credits sales revenue... But the debate between skeptics and devotees of the company whether Tesla is truly profitable has become a "Holy War," according to Gene Munster, managing partner of Loup Ventures and a leading tech analyst. "They're debating two different things. They'll never come to a resolution," he said. Munster believes critics focus too much on how the credits still exceed net income. He contends that automotive gross profit margin, excluding those sales of regulatory credits, is the best barometer for the company's financial success. "It's a leading indicator," of that measure of Tesla's profit, he said. "There's no chance that GM and VW are making money on that basis on their EVs..." Tesla shares are now worth roughly as much as those of the combined 12 largest automakers who sell more than 90% of autos globally. What Tesla has that other automakers don't is rapid growth... Tech analyst Gene Munster also tells CNN "Something most people can agree on... Electric vehicles are the future. I think that's a safe assumption."
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