What a Surprise #1: Tesla’s Profit doesn’t come from selling cars – Insanely Insane

Tesla Q4 2020 Vehicle Production & Deliveries


PALO ALTO, Calif., January 2, 2021 – In 2020, we produced and delivered half a million vehicles, in line with our most recent guidance. In addition, Model Y production in Shanghai has begun, with deliveries expected to begin shortly.

Q4 2020

 ProductionDeliveriesSubject to operating lease accounting
Model S/X16,09718,92011%
Model 3/Y163,660161,6507%


Model S/X54,80557,039 
Model 3/Y454,932442,511 

“This is always an area that’s extremely difficult for us to forecast,” said Tesla’s Chief Financial Officer Zachary Kirkhorn. “In the long term, regulatory credit sales will not be a material part of the business, and we don’t plan the business around that. It’s possible that for a handful of additional quarters, it remains strong. It’s also possible that it’s not.”

The 11 states which will require a certain percentage of cars to be zero emission vehicles, or the automakers to purchase credits from a company like Tesla which has exceeded the target, are California, Colorado, Connecticut, Maine, Maryland, Massachusetts, New York, New Jersey, Oregon, Rhode Island and Vermont.

The company reported 2020 adjusted net income, excluding items such as $1.7 billion stock-based compensation, of $2.5 billion. 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. And its free cash flow of $2.8 billion was up 158% from a year earlier, a dramatic turnaround from 2018 when Tesla was burning through cash and in danger of running out of money.

Elon Musk Tesla

“They’re not going to stay at 80-90% share of the EV market, but they can keep growing even with much lower market share,” said Daniel Ives, a technology analyst with Wedbush Securities. “We’re looking at north of 3 million to 4 million vehicles annually as we go into 2025-26, with 40% of that growth coming from China. We believe now they are on the trajectory that even without [the EV] credits they’ll still be profitable.”

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 (TSLA) shares.


  • Tesla makes, sells, and services all-electric vehicles in the U.S., Europe, and China. It also sells energy generation products.
  • The company gets the vast majority of its revenue and profit from automotive sales.
  • Tesla is experiencing rapid growth in China.
  • The company has posted annual losses in each fiscal year since going public in 2010, but just posted its fifth consecutive quarter of profits in Q3 2020.
  • Tesla will be added to the S&P 500 before trading on Dec. 21, 2020.


Tesla’s Automotive segment comprises the design, development, manufacturing, sales, as well as the leasing of electric vehicles and automotive regulatory credits.The segment, which accounts for 93% of total revenue and 99% of total gross profit, also includes non-warranty after-sales vehicle services, sales of used vehicles, retail merchandise, and vehicle insurance revenue.5 The segment posted gross profit of $2.0 billion in Q3 2020, up 85.1% compared to the same three-month period a year ago. Revenue rose 38.8% to $8.2 billion.6

Energy Generation and Storage

The Energy Generation and Storage segment, which accounts for 7% of total revenue and 1% of total gross profit, includes the design, manufacture, installation, sales, and leasing of solar energy generation and energy storage products and related services.7 The segment posted gross profit of $21 million in Q3 2020, down 76.1% compared to the same quarter a year ago. Revenue for the segment rose 44.0% to $579 million.8

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Tesla Model S

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Abhishek Shah

Journalist at TechMantle Technology Writer, Entrepreneurship, Business, IoT, Management

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