Tesla Has First Profitable Year, but Competition Is Growing - The New York Times

The company benefited from a jump in sales of electric cars in China and Europe, but its fourth quarter earnings fell short of Wall Street’s expectations.

Tesla on Wednesday reported its first full-year profit, a feat 18 years in the making.

The electric carmaker, which was founded in 2003, said it earned $721 million in 2020, in contrast to a loss of $862 million in 2019, even though the pandemic was a drag on sales and production in the United States. The company made $270 million in the last three months of the year, up from $105 million in the same period of 2019.

But the fourth-quarter earnings were below analysts’ expectations, and Tesla’s stock was down about 5 percent in extended trading on Wednesday.

Tesla’s shift toward profitability is an important turning point for the company and for an auto industry that has seen few successful new entrants in recent decades. The company’s success was made possible in large part by rising sales in China and Europe, and the addition of a fourth car, the Model Y, that appears to have become its top seller in the United States.

Last year was “a defining year for us on many levels,” Tesla’s chief executive, Elon Musk, said in a conference call with analysts. “Despite a challenging environment, we reached an important milestone in production and delivery of a half a million cars.”

Tesla’s sales rose about 36 percent to 499,550 cars in 2020. The increase was fueled by a factory in Shanghai that opened a year ago and is now starting to produce the Model Y as well as its predecessor, the Model 3. China is the world’s largest market for electric and conventional cars.

The company reported revenue of $10.7 billion in the fourth quarter, up 45.5 percent from the year-ago period. Its full year revenue climbed to $31.5 billion, up from $24.6 billion in 2019.

But Tesla said its operating profit margin, a measure of how much money it makes for every dollar of sales, fell to 5.4 percent in the fourth quarter from 9.2 percent in the third quarter. The gross profit margin in its automotive business was 24.1 percent, the lowest level of any quarter in 2020.

Tesla’s revenue and bottom line were helped by the sale of $401 million in emissions credits in the fourth quarter to other automakers who need them to meet regulatory standards.

Mr. Musk has suggested that the company could sell more than 800,000 cars in 2021 as it expands output at its Chinese plant and opens a third plant under construction near Berlin. It is also building a factory near Austin, Texas, that is expected to begin churning out cars by the end of the year.

In a statement, the company forecast 2021 sales would grow by more than 50 percent, implying a sales total of at least 750,000 cars. The company also said it expected annual sales growth to average about 50 percent over the next several years, and said deliveries of its semi truck would begin before the end of the year.

But the automaker is also facing challenges. Tesla earns less money than some of its larger and more established rivals. In the third quarter alone, General Motors generated $4 billion in profit — more than five times Tesla’s total for the whole year. G.M. will report its fourth-quarter earnings on Feb. 10

In Europe, Tesla is encountering increasing competition from Volkswagen, Renault, Hyundai, Daimler and other manufacturers that have introduced improved and more affordable electric cars. Some of those models are outselling Tesla’s Model 3, which had previously been the best-selling electric car in the region.

While Tesla does not break out its sales by region or country, it appears that the company’s U.S. sales slowed in 2020, mainly because of the coronavirus pandemic. But the company has also seen Model 3 sales stall as Model Y deliveries have increased, according to data on new-car registrations from California, Texas and 20 other states analyzed by Cross-Sell, a market research firm.

Competition in the United States is heating up, too. Ford Motor recently started delivering the Mustang Mach-E, an electric sport-utility vehicle, and Volkswagen says it will introduce an electric S.U.V., the ID.4, in March. Both are eligible for federal tax credits that no longer apply to Tesla cars, making them more affordable than the Model Y.

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