Tesla overcomes factory shutdown to hit profit milestone
By Tom Krisher, The Associated PressGeneral Automotive
EV maker poised to enter S&P 500 as winning streak continues.
DETROIT – Tesla overcame a seven-week pandemic-related shutdown at its U.S. assembly plant to post a surprising $104 million net profit for the second quarter.
It was the company’s fourth-straight positive quarter, qualifying it to be included in the S&P 500 index of corporate titans. A decision on that will be made later.
Local government restrictions forced the electric car and solar panel maker to close its only U.S. assembly factory in Fremont, California, from March 23 to May 11. The company paid roughly 10,000 workers for part of the shutdown and continued health care and other benefits.
Excluding one-time items such as $347 million in stock-based compensation, Tesla made $2.18 per share. That beat Wall Street estimates of a break-even quarter, according to FactSet. Revenue was down 4.9% from a year ago to $6.04 billion. That still beat estimates of $5.15 billion.
The company said its progress in the first half of the year has positioned it for success in the second half as production output continues to improve.
Telsa also said it has picked a site for its second U.S. assembly plant, although the location wasn’t released. The Austin, Texas, area appeared to be the front-runner but Tulsa, Oklahoma, was a possibility.
The surprising profit, compared with a $408 million loss a year ago, pushed Tesla’s shares up 5.3% to $1,676.22 in after-hours trading Wednesday.
Tesla would have lost money, though, without $428 million it earned from selling electric vehicle credits to other automakers so they can meet government fuel economy and pollution regulations.
The company said its profit increased over the first quarter’s tiny $16 million because of “fundamental operational improvements.”
But it issued a note of caution in its investor letter released Wednesday after the markets closed: “It remains difficult to predict whether there will be further operational interruptions or how global consumer sentiment will evolve in the second half of 2020.”
Tesla said it should have enough money to fund new products and to build new factories in the U.S. and Germany, as well as cover other expenses. The company said it would begin delivering its electric semi next year.
Tesla generated $964 million in cash from its operations from April through June, and it ended the quarter with about $9.1 billion in cash. But it also had $8.5 billion in debts, according to financial statements.
CEO Elon Musk had pledged to build more than 500,000 vehicles this year, but the company said the Fremont factory shutdown has made that goal more difficult. Still, the company has a target of delivering more than a half-million vehicles this year, and is installing equipment to increase Fremont’s output, the letter said.
Tesla’s second-quarter profit came after it announced better-than-expected global sales during the period. The company said it delivered 90,650 vehicles from April through June as it rolled out the new Model Y SUV in the U.S. and China. That’s a 2.5% increase over the first quarter’s 88,400. But it was a 4.8% drop from the second quarter of 2019, when Tesla delivered 95,200 vehicles.
The second-quarter sales came with a feverish push in June to crank out and sell more vehicles in the U.S. But the push was accompanied by numerous quality problems reported on Tesla owner forums and social media.