2013-05-09

Tesla Cheers Up The Electric Vehicle Industry By Becoming Profitable

An electric car making money? People said it couldn’t be done. And yet, Elon Musk’s company has hit the black.

On the surface, it appears that the electric vehicle industry has had a rough go of it these past few years. Fisker Automotive dealt with a very public collapse. Sales of the extended range electric Chevy Volt have declined 11% since April 2012. Tesla’s Model S sedan received a beating in a New York Times review of its performance.

But things are looking up. The electric Nissan Leaf had a record-breaking month in March. And this week, Tesla announced that it’s profitable for the first time.

In a shareholder letter, Tesla CEO Elon Musk revealed that the company turned a profit of $15 million. Sales also received an 83% lift from last quarter, with $562 million in total revenues—a record for Tesla. The Model S also beat sales of both the Nissan Leaf (3,695 sold) and the Chevrolet Volt (4,421 sold) to become the best-selling EV, with 4,900 vehicles sold. Tesla has proven that top-notch branding can overshadow price in the EV world (the Model S is more expensive than both the Leaf and Volt), at least for now.

One important note from Tesla’s shareholder letter (hat tip to Quartz): 12% of Tesla’s first-quarter revenues came from selling zero-emission vehicle (ZEV) credits to manufacturers who haven’t reached California’s requirements for selling a certain number of zero-emissions vehicles. Musk writes: "We expect this to decline significantly in future quarters, as ZEV credits will only apply to about 1/6 of worldwide deliveries, versus roughly half of U.S. deliveries, and the price per credit has declined."

Nonetheless, Tesla expects its gross margins to hit 25% by the fourth quarter of 2013, proving that the Department of Energy investments in EVs aren’t all duds. As Tesla rolls out the Model S in Europe later this year and releases even more affordable vehicles—as the company has long promised—chances are high that its economic situation will continue to improve.

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