As expected, Tesla announced that it earned a small profit ($139.5 million on $7.23 billion in revenue) for the second quarter in a row, a major milestone for the company.
Sales of Model 3 sales remain strong – with over 140,000 units sold, the electric sedan represented 80% of all EV sales in the US in 2018, according to Tesla’s Shareholder Letter. More impressively, it was the best-selling passenger car in the US by revenue in both Q3 and Q4, and the best-selling “premium vehicle” (including SUVs) in the US in 2018 – an honor that no American automaker has earned in decades.
The big question is of course whether this demand will hold up. Naturally, Elon Musk is optimistic: “Even if there’s a global recession, we’re expecting deliveries this year to be about 50 percent higher than last year. And it could be a lot more than that, but even with tough economic times to see 50 percent growth is pretty nutty.”
Deliveries to Europe and China, scheduled to begin soon, should keep the party going. But to kick things into high gear, the company needs to start selling that $35,000 Model 3 soon, and with a healthy margin. According to the Shareholder Letter, things are on track: “The labor hours per Model 3 vehicle declined yet again by roughly 20% compared to Q3 and by about 65% in the second half of 2018 alone. Despite introducing a lower-priced mid-range variant and other headwinds, Model 3’s gross margin remained stable in Q4 at over 20%.”
As always, Tesla is looking past the immediate future to two potentially game-changing new vehicles. “We might be ready to unveil [the Tesla Pickup] this summer, Musk teased. “It will be something quite unique, unlike anything.”
Tesla hopes to begin volume production of the Model Y by the end of 2020, and to realize substantial cost savings in its manufacturing. “Tesla is now starting to put together the tooling that will allow for production of the Model Y,” said Musk. “The midsize SUV will share more than three quarters of its parts with the Model 3, and Tesla will likely build it at its Gigafactory battery plant outside Reno. Batteries and powertrains will come out and go straight into the vehicle.”