Tesla posts quarterly profit but cash flow remains negative
Tesla’s quarterly earnings report for the first quarter of this year in the face of COVID-19 is a success, though some benchmarks are yet to be reached.
TESLA HAS posted its third consecutive quarterly profit since promising investors it would pull itself out of a historically long period of red ink. However, not all it’s shiny with the US carmaker, with it recording negative cash flow equal to almost US$1 billion.
Buoying Tesla’s US$5.985 billion revenue for the first quarter – a US$16 million profit – of this year were strong sales in China, lower operating costs, and its highest sell-off of regulatory carbon credits yet, trading US$354 million to competing automakers which need those credits to offset emissions. That’s a 64 per cent increase in its credit trading during the same period in 2019, however, analysts in the US predict Tesla’s regulatory credit trading will soften for the remainder of 2020.
Tesla also lowered operating expenses by 13 per cent and improved gross margins. But it’s worth noting that Tesla counts credit trading into its revenues and gross margins, which are predicted to drop. The complex accounting means that Tesla has not yet met its target to be cash-flow positive in 2020, recording a negative free-cash-flow of US$895 million in Q1 2020.
But overall, Tesla delivered over 88,000 vehicles in Q1 2020 – a little under target for its aimed 500,000 vehicle deliveries this year – and revenue grew 32 per cent higher than the same period last year. That defies most movements across the automotive industry in the wake of COVID-19 shutdowns, and is also despite Tesla temporarily closing its China and US production sites. The company said in a shareholder letter that it plans to increase production soon.
“For our US factories, it remains uncertain how quickly we and our suppliers will be able to ramp production after resuming operations. We are coordinating closely with each supplier and associated government.”