Electric car manufacturer Tesla (TSLA +0.07%) has been in the news lately, and for good reason. As more start-ups and established automakers release their own electric vehicles onto the market, Tesla has been busy innovating and expanding production capacity. Let's take a look at some of the things going on with the company.
Third-quarter results beat estimates
Take a look at some of the results from Tesla's latest quarterly report.
| Metric | Q3 2019 | Q3 2020 | Change YOY |
|---|---|---|---|
|
Total revenue | $6.3 billion | $8.8 billion | 39% |
|
Net income | $150 million | $369 million | 146% |
|
Operating cash flow | $756 million | $2.4 billion | 217% |
Data source: Tesla. YOY = year over year.
Yet again, Tesla managed to shatter expectations. At this time last year, the company posted $907 million in net losses for the first nine months of 2019; this year, the company has posted profits of $566 million.
Third-quarter revenue was a record high for Tesla, which was somewhat expected given record delivery figures. More impressive, however, might be how the company more than doubled its operating cash flow from the year-go quarter on the back of higher margins and revenue growth. With Tesla growing rapidly to meet the demand for its vehicles, a 217% year-over-year increase in operating cash flow definitely indicates the company can handle further growth costs. That is significant, given that Tesla plans to spend up to $12 billion over the next two years in order to expand its factories and ramp up production capacity. With $8.4 billion in working capital and growing cash flows, the company seems able to meet that $12 billion figure without straining its finances.
Image source: Tesla.
Elon Musk announces lower prices
In a move that generated even more buzz about the company, Tesla dramatically lowered the sticker price on the Model S early in October. With two price cuts in one week, the automaker reduced the cost for the luxury model by nearly 7.5%, from $74,990 to $69,420.
Why lower prices on a popular vehicle? Some attribute the move to the competition's pricing, since Musk announced the price cut shortly after start-up rival Lucid Motors stated that its upcoming base model would cost $77,400, or $69,900 after a U.S. federal tax credit. The Lucid Air will have a maximum projected range of 517 miles per single charge, while the Tesla Model S has an EPA-estimated range of 402. In this case, barring further technological innovation, a price cut helps the Model S remain competitive.
Competition is heating up in the electric vehicle market, with traditional auto companies increasingly offering electric-gasoline hybrid options and a number of start-ups developing their own electric luxury sedans, trucks, and even motorcycles. But U.S. News & World Report still ranked Tesla's Model S as the No. 1 electric car in the U.S. for 2020, based largely on its acceleration, driving range, and ample cargo space. However, with Lucid founded by ex-Tesla executive Peter Rawlinson making moves, that top spot may soon be in jeopardy.
So increasing the number of people able and willing to buy Tesla's high-end model could be another reason for lowering prices. The company currently does not have the capacity to fully meet the demand for its vehicles, thus it's rapidly building factories. If consumers have more high-end choices from which to choose and Tesla has a mile-long waiting list, the company could lose potential customers to other brands. More accessible pricing for its flagship car should help it hold onto its lead in consumer awareness until it comes up with another breakthrough.
"Full" self-driving mode announced
Another reason people are talking about Tesla is because it just initiated a rollout of a new self-driving mode for its vehicles, billed as fully autonomous. While the system is still in beta testing, videos of the cars using their Autopilot capabilities promise futuristic ease and happy drivers. Many consumers interested in buying a Tesla may be looking for a self-driving vehicle, but this beta version does not yet seem to meet the hype.
Almost immediately after the feature's rollout, the U.S. National Highway Traffic Safety Administration reminded drivers that "no vehicle available for purchase today is capable of driving itself." What's more, another slew of videos quickly began circulating online featuring the system making mistakes that required drivers to quickly take back control of their cars. Consumer Reports also released its second-ever rankings of driving assistance systems (to be clear, not full-autonomy systems), and despite being well-known, Tesla's Autopilot on the Model Y only ranked second, scoring 57 out of a possible 100 points.
The new features add to Autopilot's ability to steer, accelerate, and brake within the same lane; the "full" version should allow the car to automatically drive from highway to ramps, change lanes, park, assist stops at traffic intersections, and come find the driver in a parking lot when summoned.
Tesla was the first automaker to premiere a semi-autonomous driving system, and it clearly aims to fulfill its promise of offering customers a fully capable self-driving vehicle. Despite the hype, though, the system isn't fully there.
But the company is constantly evolving, and with time and effort, Tesla should be able to meet its customers' appetite for more cars and hands-off driving capabilities. As a company, Tesla has met a number of challenges over the years, and ultimately, it has been able to overcome them all and grow.
