is-tesla-profitable

Is Tesla Profitable?

Yes, Tesla has been profitable since 2020. Indeed, Tesla generated $862 million in 2020. And it further generated $5.6 billion in net income by 2021.

YearRevenuesNet Profits
2013$2B-$74M
2014$3.2B-$294M
2015$4B-$888M
2016$7B-$773M
2017$11.76B-$2.24B
2018$21.46B-$1B
2019$24.58B-$775M
2020$31.53B$862M
2021$53.8B$5.6B
FourWeekMBA Intelligence – Source: Financial Statements

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.

tesla-innovators-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:

  1. Build sports car
  2. Use that money to build an affordable car
  3. Use that money to build an even more affordable car
  4. 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.

tesla-early-adopters

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 points for that to happen was 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.

tesla-business-model
Tesla is vertically integrated. Therefore, the company runs and operates the Tesla plants where cars are manufactured and the Gigafactory, which produces the battery packs and stationary storage systems for its electric vehicles, which are sold via direct channels like the Tesla online store and the Tesla physical stores.
tesla-employees-number

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.

Read Also: Tesla Business Model

Related to Tesla

Who Is Elon Musk

who-is-elon-musk
Elon Musk, seen as one of the most visionary tech entrepreneurs from the Silicon Valley scene, started his “career” as an entrepreneur at an early age. After selling his first startup, Zip2, in 1999, he made $22 million, which he used to found X.com, which would later become PayPal, and sell for over a billion to eBay (Musk made $180 million from the deal). He founded other companies like Tesla (he didn’t start it but became a major investor in the early years) and SpaceX. Tesla started as an electric sports car niche player, eventually turned into a mass manufacturing electric car maker.

Who Owns Tesla

who-owns-tesla
Elon Musk, an early investor and CEO of Tesla, is the major shareholder with 21.7% of the stocks. Other major shareholders comprise investment firms like Baillie Gifford & Co. (7.7%), FMR LLC (5.3%), Capital Ventures International (5.2%), T. Rowe Price Associates (5.2%), and Capital World Investors (5%). Another major individual shareholder is Larry Ellison (co-founder and CEO of Oracle), with a 1.7% stake.

History of Tesla

history-of-tesla
Founded in 2003 by Eberhard and Tarpenning, eventually, the initial co-founders left the company, and by 2004, Musk first became the main investor. After that, by 2008, he took over as CEO of the company. Tesla would go through many near-death experiences until 2018. And yet, by 2021, Tesla will become a trillion-dollar company.

Tesla Business Model

tesla-business-model
Tesla is vertically integrated. Therefore, the company runs and operates the Tesla’s plants where cars are manufactured and the Gigafactory, which produces the battery packs and stationary storage systems for its electric vehicles, which are sold via direct channels like the Tesla online store and the Tesla physical stores.

Tesla Competitors

tesla-competitors
As an electric automaker and builder of sports cars and now trucks, Tesla’s competitors comprise companies like Ford, Mercedes-Benz, Porsche, Lamborghini, Audi, Rivian Lucid Motors, Toyota, and more. At the same time, Tesla is an electric energy production and storage company (SolarCity); it competes with Sunrun, SunPower, and Vivint Solar. And as an autonomous driving company, it competes with companies like Zoox, Waymo, and Baidu with self-driving software.

Real-Time Insurance

real-time-insurance
A real-time insurance business model enables Tesla to build its insurance arm by dynamically adjusting the premiums based on real-time driving behavior. Reduced insurance premiums hooked with the leasing arm enable Tesla to scale its demand side of the business.

Tesla Business Model

tesla-financials
In 2021, Tesla generated over $53.8 billion in revenues, compared to $31.5 billion in 2020. The largest segment in automotive sales (comprising regulatory credits revenues), followed by leasing (as part of the automotive), generated $1.6 billion in 2021. Outside automotive sales (non-warranty after-sales vehicle services, sales of used vehicles, retail merchandise, and more) accounted for $3.8 billion. And energy generation and storage accounted for $2.8 billion. US and China are the primary markets, with almost $24 billion and nearly $14 billion, respectively, in 2021. In 2021, Tesla generated $5.6 billion in Net Income, a net margin of over 10%.

Read Also: Tesla Business Model, Tesla SWOT Analysis, Transitional Business Models, Tesla Mission Statement.

How did Tesla use a transitional business model to thrive?

Read next: Tesla Business Model, Tesla SWOT Analysis.

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