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Is Tesla Still Growing Its Automotive Sales Revenue?

The Interior of a Model 3. Flickr Image.

Tesla automotive sales is one of the revenue segments of the company. It consists of automotive sales with and without resale value guarantee. Besides, automotive sales also include revenue from the sales of regulatory credits. For readers who are interested in tracking the revenue growth from the sale of regulatory credits, please visit this page: Tesla Regulatory Credits Revenue.

An important point to remember is that the automotive sales revenue does not include any sales from automotive leasing revenue and this segment of revenue is the biggest revenue contributor to Tesla (shown in the chart below). As a result, automotive sales is the single most important growth driver for the company. Any impact to automotive sales would absolutely affect the stock price of the company.

In this article, we are looking exclusively at automotive sales revenue and its respective growth rate. For detailed discussion of how automotive sales revenue is recognized in the income statement, please visit this page: Tesla Revenue Recognition.

If readers are also interested in reading about Tesla automotive leasing revenue, please visit this page: Tesla Leasing Revenue from Cars.

Chart of Tesla Quarterly Automotive Sales and Gross Margin

Tesla quarterly automotive sales and gross margin

Tesla quarterly automotive sales and gross margin

The chart above represents Tesla quarterly automotive sales revenue and gross margin for the past 5 years from 2015 to 2019.

From the plot, revenue from automotive sales was the highest in 4Q18, topping $6 billion for the first time. In addition, the second highest revenue was achieved in the same year in 3Q18 at $5.88 billion. The record revenues in both of these quarters were primarily due to the ramp of Model 3 production and subsequently deliveries to customers.

In addition, the long term trend of the plot shows that automotive sales revenue is expanding at a significant rate. The figure has increased from a mere $0.89 billion in 1Q15 to a whopping $3.51 billion in 1Q19. The increment during this period represents a 400% gain!

In terms of gross margin, the average gross margin for the past 17 quarters was 23%. Tesla had stated multiple times that it would try to maintain the gross margin at around 20% and from the results above, it looks like the company has successfully done it.

Gross margin dropped to the low of 15% in 3Q17 and slowly coming back up to the 20% range in Q3 and Q4 of 2018. According to the company quarterly filings, the reason for the drop in gross margin in the end of 2017 was higher cost associated with the ramp of Model 3 production.

When the production of Model 3 stabilized starting 2018, there was an improvement in gross margin starting 2018. Both 3Q and 4Q of 2018 saw a positive net income and this was due to the Model 3 record deliveries. In the same period, we are also seeing record automotive sales revenue that topped more than $5 billion for the first time in the company history.

Chart of Tesla Quarterly Automotive Sales As a Percentage of Total Revenue

Tesla quarterly automotive sales to total revenue

Tesla quarterly automotive sales to total revenue

The chart above represents Tesla quarterly automotive sales revenue as a percentage of total revenue for the past 5 years from 2015 to 2019.

From the chart above, automotive sales contributed in average of around 80% of revenue to the company total revenue. The remaining revenue was contributed by automotive leasing and also from energy segment.

In addition, the percentage of automotive sales to total revenue was the highest, at around 90% of revenue in 2015. Since then the percentage figure had steadily declined to around 70% of total revenue during 2017 and 2018. The reason for the decline was the expansion of Tesla other business segments such as automotive leasing and energy generation system as well as storage products in 2017 and 2018. The expansion of these business segments had contributed significantly to the growth of revenue for the company.

Chart of Tesla Quarterly Automotive Sales Sequential Growth

Tesla quarterly automotive sales sequential growth

Tesla quarterly automotive sales sequential growth

The chart above represents Tesla quarterly automotive sales revenue sequential growth rate (in percentage) for the past 5 years from 2015 to 2019.

From a calculation which i did not show here, the average quarterly growth rate for the past 17 quarters was around 19%. This double digit growth rate was quite exceptional and it shows that Tesla is still growing at an impressive rate from quarter to quarter. Moreover, out of the 17 quarters shown above, there were only 5 quarters with negative sequential growth rate.

The latest quarter of 1Q19 shows that the sequential growth of automotive sales was at -42% compared to prior quarter. This drop in quarterly revenue from prior quarter was quite significant. Tesla had explained that the drop in revenue was mainly due to the pull-forward sales that occurred in 4Q18 because of the reduction in federal tax credits starting 2019.

Chart of Tesla Quarterly Automotive Sales Year Over Year Growth

Tesla quarterly automotive sales year over year growth

Tesla quarterly automotive sales year over year growth

The chart above represents Tesla quarterly automotive sales revenue year over year growth rate (in percentage) for the past 5 years from 2015 to 2019.

Compare to sequential growth, the automotive sales revenue year over year (yoy) is even more impressive. From the chart, you can notice that all quarters had shown positive growth rate. As a result, when i calculated the average yoy growth rate, the figure was an impressive rate of 69%. The figure shows that Tesla is growing exceptionally year over year in terms of automotive sales.

In 1Q19, sequential growth rate was -43% but year over year growth rate was a whopping 37%. It shows that the company automotive sales was still expanding when compared to the same quarter from the prior year even though sequentially the revenue had declined.

Conclusion

Is Tesla Still Growing Its Automotive Sales Revenue? The answer is definitely yes based on all the analysis and the data in the charts above.

Long term trend of automotive sales shows that Tesla is still growing and its automotive sales figure is still expanding at an impressive rate.

Automotive sales revenue is the largest revenue driver for Tesla as it contributes in average more than 80% of revenue to the company top line.

The average sequential growth rate for the past 16 quarters for automotive sales was 19%.

The average year over year growth rate for automotive sales starting 2016 was 69%.

Disclosure:The authors wrote this article themselves, and it expresses their own opinions. The authors are not receiving compensation for writing the article. The authors have no business relationship with any company whose stocks are mentioned in this article.

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References:

1. Financial figures in all charts and tables were obtained from Tesla SEC Filings.

2. Featured image was obtained from Jakob Härter.

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