Tesla was profitable in 2022, and it generated $12.55 billion in net profits. Tesla has been profitable since 2020. Indeed, Tesla generated $862 million in net profits in 2020. And it further generated $5.6 billion in net profits in 2021.
For all of its history, Tesla has been losing money. Until 2020, it started to post profits.
What happened? And how did Tesla turn from a company losing billions to become the most profitable car maker?
Let me tell you the whole story.
Tesla was launched by Martin Eberhard and Marc Tarpenning in July 2003.
Eberhard, an entrepreneur who had sold his previous company, was the CEO of Tesla until he was ousted, and Elon Musk took over as CEO in 2008.
Tesla has been in a precarious state for most of its life, as Musk tried to ramp up the production of Tesla’s Roadster.
The Tesla Roadster was a high-end sports car that was intended to showcase the fact that an EV vehicle could be built with both performance and aesthetics in mind.
The first path to making the production of the Tesla Roadster was plenty of drama, with Musk sinking millions into the company while also running SpaceX.
By 2006, Musk would lay out the foundation for Tesla’s plan for the next decade. It was a four points master plan structured as below:
- Build sports car
- Use that money to build an affordable car
- Use that money to build an even more affordable car
- While doing above, also provide zero emission electric power generation options
After many manufacturing issues, which made the cost of the car spike while almost bankrupting Tesla and Elon Musk, the first Tesla Roadsters were eventually launched.
The Roadster launch showed that it was possible to build an EV that combined performance and aesthetics.
While Tesla ramped up the production of Roadersters, it started to plan – in parallel – the prototyping and launch of new models, which aim was to move to a wider segment of the market.
The Tesla Model S first Tesla tried to move from the innovators to the early adopters.
Also, the path was not linear there, as Tesla faced many near-death experiences.
Model 3: for mass adoption
A four-door mid-size sedan with a base price for mass-market appeal was produced both in the Fremont Factory and at the Gigafactory in Shanghai.
It aims to enable Tesla to become adopted within a mass market.
The real turning point for that happened when in 2020 first, and in 2022 when Tesla managed to open its Gigafactories, first in Shangai and later in Berlin.
These are the manufacturing facilities.
The last piece of the puzzle of Tesla’s ability to scale up manufacturing was its opening of the Tesla Gigaffactory in Texas.
Between 2020-2022 Tesla turned into a transformed company. It reached a scale at the manufacturing level and finally had its supply side pick up with demand.
In fact, for all its life, Tesla’s manufacturing could not meet demand.
Yet, by 2022, things have changed.
Tesla is not only able to produce its EVs at scale but also to do that with wide margins.
This is what the Tesla business model looks like.
The most challenging part for a car company was not the demand side (which is also extremely difficult).
It was the supply side.
Building a vertically integrated car company from scratch, producing only EVs, was one of the greatest challenges of this century.
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