Tesla reported a profit for the fourth straight quarter on Wednesday, surpassing a key milestone for the perennially loss-making electric car company.
The company reported net income of $110m for the second quarter with a net profit of $104m, which it attributed to “fundamental operational improvement”. Revenue was down 4.9% from a year ago to $6.04bn for the quarter, but still beat estimates of $5.15bn.
Tesla’s share price soared 5% on the profitability news, which could qualify the stock for inclusion in the S&P 500 index. Though Tesla’s qualification for the index is not assured, inclusion would probably increase its access to institutional investors.
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“I’ve never been more optimistic or excited about the future of Tesla,” said Elon Musk, Tesla’s chief executive, of the results on a conference call with investors.
Musk announced on the call that Tesla would construct its next US factory in Travis county, Texas, near Austin. The factory will produce the company’s pickup truck, which it is calling a “cybertruck”, and its semi-truck, Musk said, in addition to its two mass-market cars, the Model 3 and Model Y, for customers in the eastern half of the country.
“Tesla’s Gigafactory Texas will keep the Texas economy the strongest in the nation and will create thousands of jobs for hard-working Texans,” the state’s governor, Greg Abbott, said in a statement.
Texas had been competing with Tulsa, Oklahoma, to lure the factory. Travis county officials voted this month to give Tesla at least $14.7m in tax breaks, CNBC reported. Musk said the factory site, which is on the Colorado river, would be an “ecological paradise” that is “open to the public”.
Expectations had been high among Wall Street analysts, following Tesla’s report in early July that it had delivered slightly more than 90,000 vehicles in the second quarter, well above expectations.
Daniel Ives, an analyst with Wedbush, said that Tesla had “executed flawlessly” this quarter despite the global economic downturn due to Covid-19, specifically citing the company’s success in China.
Nicholas Hyett, an analyst with Hargreaves Lansdown, attributed the company’s success to “increasing sales in China, which look to be relatively higher margin thanks to the lower manufacturing costs, and increased recognition of software revenues”.
For years, Tesla’s stock price has defied gravity, even as it recorded massive losses and struggled to hit its production targets. The run of positive results will be seen as a vindication of Musk’s unconventional leadership, as well as its big bet on expanding in China.
Tesla’s recent success has come against the now-familiar backdrop of chaos related to its CEO, Musk. The billionaire has been a major source of coronavirus misinformation throughout the pandemic, sharing false or misleading sources and engaging in a high-profile standoff with public health officials in northern California over lockdown restrictions, which effected the company’s only US car factory.
Musk erupted into a profane rant during the first quarter earnings call in April, calling public health measures “fascist” and demanding that the government “give people back their goddamn freedom”.