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Breaking Down Tesla Total Revenue

Tesla Model S at a car show. Source: Flickr

Revenue is one critical variable that tracks the growth of a company. It’s no exception for Tesla (NASDAQ:TSLA).

It’s important to look at the revenue over a long period of time, preferably over several quarters to rule out any manipulation.

In this article, we will look at the growth of Tesla’s revenue or total sales over several years.

Other than revenue, we will also keep an eye on the revenue growth rates, including the year on year (YoY) and quarterly (QoQ) growth rates.

The gross margin is another important variable that we will zoom into, as it reveals about the company’s profitability.

Let’s move on!

Breakdown of Tesla’s Revenue

Before heading to revenue analysis, let’s briefly take a look at Tesla’s financial statements to find out what makes up the company’s total sales.

The following snapshot shows Tesla’s revenue breakdown extracted from the income statement.

Tesla annual sales

Tesla annual sales from 2017 to 2019

Based on the snapshot above, Tesla’s revenue breakdown is further elaborated below:

In short, Tesla’s total sales are divided into several revenue segments, including automotive sales and leasing revenue, services, and the energy sector.

In the following discussion, we will look at how each of Tesla’s revenue segment has performed over the years.

Let’s read on!

Chart of Tesla’s Revenue (Quarterly)

Tesla quarterly revenue

Tesla quarterly revenue

Let’s first look at Tesla’s total sales on a quarterly basis.

The chart above keeps track of Tesla’s total revenue by quarter for the past 6 years from 2015 to 2020.

Based on the chart, Tesla’s revenue has grown from around $1 billion in 1Q 2015 to a record high of nearly $11 billion in 4Q 2020, on a quarterly basis.

Of course, the revenue growth has not been smooth sailing all these years as there were ups and downs along the way.

For instance, revenues declined by 40% in 1Q 2019 compared to the prior quarter but were still up 12.5% year over year.

Overall, Tesla’s total revenue has been growing considerably since 2015.

Over the years, Tesla’s revenue growth has been nothing short of extraordinary, illustrating the increasing demand for the company’s automotive and energy products.

A rising trend in the plot indicates a growing revenue and thus, a growing company. This is especially important for a growth company like Tesla.

You may see some ups and downs in the plot, but the long-term trend must be rising. This is what we are seeing in Tesla’s revenue plot above.

Nevertheless, Tesla’s total sales totaled $10.7 billion in Q4 2020, representing a year over year increase of 46%.

Chart of Tesla’s Revenue (TTM)

Tesla TTM revenue

Tesla TTM revenue

To smooth out the quarterly plot, I created the trailing 12-month (TTM) revenue plot as shown in the chart above.

On a TTM basis, Tesla’s revenue grew the most from 2015 to 2018. TTM total sales nearly doubled every single year between 2015 and 2018, driven mainly by the increase in vehicle deliveries and growth in other parts of the business, including the energy sector.

For example, Tesla’s total sales grew 75% year over year from 4Q15 to 4Q16.

Similarly, Tesla’s total sales grew 70% year over year from 4Q16 to 4Q17.

Tesla’s TTM revenue reached the highest at $31.5 billion in 4Q20, a new record since its IPO.

Sequentially, Tesla’s TTM revenue grew by 12% in 2020 4Q. Year over year, Tesla’s TTM revenue grew by 28% in the same quarter.

The outstanding result in 2020 Q4 was achieved through substantial growth in vehicle production and deliveries as well as growth in other parts of the business, including the services and energy segments.

While Tesla may have reported explosive growth in TTM revenue, the vehicle average selling price (ASP) has declined by about 11% year-on-year in 2020 according to Tesla 4Q 2020 earning release.

The decline in ASP has been mainly attributed to the company’s shift in product mix to the more affordable Model 3 and Model Y from the premium Model S/X.

Chart of Tesla’s Gross Margin (Quarterly)

Tesla quarterly gross margin

Tesla quarterly gross margin

The chart above shows Tesla’s quarterly gross margin from 2015 to 4Q 2020 which is the latest quarter.

The gross margin is an important metric that measures the gross profitability of a company.

For your information, the gross margin in the chart above is based on the GAAP standard and accounts only for Tesla’s costs of sales while leaving out other expenses such as research and development and SGA.

According to the chart above, Tesla’s gross margin has trended lower between 2015 and 2019 and reached the bottom at about 12.4% in 1Q19.

However, the downtrend reversed in 2019 and the gross margin is seen ticking higher since 2019.

From 1Q 2019 onward, Tesla’s quarterly gross margin was seen rising and reached 19.2% in Q4 2020.

The expanding margin between 2019 and 2020 has been a result of strong Model 3/Y deliveries, and continuous cost reduction.

Tesla’s gross margin improvement persisted throughout 2020 in which a near 20% gross margin was seen in most of the quarters.

As of 4Q 2020, Tesla’s quarterly gross margin declined slightly to 19.2% from the prior quarter.

Chart of Tesla’s Gross Margin (TTM)

Tesla TTM gross margin

Tesla TTM gross margin

From a TTM standpoint, Tesla’s gross margin is seen improving throughout 2019 and reached a record high at 21% in 4Q 2020.

I believe that gross margin will further improve in 2021 as a result of volume expansion and continuous cost reduction.

According to the Q4 2020 earnings releases, Tesla has targeted to produce and deliver 500,000 vehicles by the end of 2020.

For your information, Tesla has met the production and delivery target in which as many as half a million vehicles were produced and delivered by the end of 2020.

Going forward, Tesla is planning to produce and deliver 750,000 vehicles by 2021, a 50% growth year over year with respect to 2020.

Achieving the 750,000 vehicle production and deliveries target will certainly drive margin expansion and thus, leading to more profits.

Chart of Tesla’s Revenue By Segment (With Automotive Sales)

Tesla revenue by segment (with automotive sales)

Tesla revenue by segment (with automotive sales)

The chart above shows Tesla’s sales breakdown into several segments.

The respective business segments have been briefly mentioned at the start of this article.

As seen from the chart, the bulk of Tesla’s sales came mainly from automotive sales which made up more than 80% of the company’s total revenue in Q4 2020.

In the same quarter, Tesla’s automotive sales revenue alone contributed more than $9 billion in sales.

The lion share of the automotive sales revenue tends to make other business segments look insignificant in terms of revenue contribution.

As of 4Q20, none of Tesla’s other business segments has yet to cross the $1 billion revenue mark.

This scenario shows just how critical the automotive product or perhaps the Model 3, is to Tesla.

Tesla has been dangerously walking on a fine line by counting on only a single product for growth since 2017.

If the Model 3 had failed miserably, Tesla would have gone out of business.

There is just too much risk for Tesla to rely wholely on a single product for its survival all this while. (Read this: Tesla’s investment risks)

Fortunately, Tesla has already started to diversify its products by introducing the Model Y, in which the company has already started producing and delivering since 2Q 2020 at the Fremont Gigafactory.

For your information, Tesla has also started producing Model Y at the Shanghai Gigafactory in late 2020 and is expected to ship Model Y for the Chinese market in early 2021.

Tesla Revenue By Segment (Excluding Automotive Sales)

Tesla revenue by segment (without automotive sales)

Tesla revenue by segment (without automotive sales)

The chart above shows Tesla’s revenue breakdown by segments but automotive sales revenue has been excluded.

As seen from the chart, only the revenue from the energy sector, automotive leasing and services are shown in the chart above.

Accordingly, Tesla’s “services and other revenue” has overtaken other business segments and became the largest revenue contributor in Q4 2018.

The services business segment’s 1st place in terms of revenue size lasted only for a few quarters before being surpassed again by the energy sector in 2020 4Q.

As seen from the chart, the energy sector has been fast catching up in terms of revenue growth during 2020.

As of 4Q 2020, Tesla’s services and other revenue reached $678 million on a quarterly basis, making it the 2nd largest sales contributor behind automotive sales.

Tesla’s solar revenue reached $752 million as of 2020 4Q on a quarterly basis, driven mainly by a record energy storage deployments of more than 3GWh by the end of 2020.

Other than energy storage, Tesla’s solar deployment also increased significantly to a total of 205 MW by the end of 2020, 18% more than the prior-year figure, which also helped to drive total energy sales higher in 2020 Q4.

While the services segment may have slightly lagged behind the automotive business, its importance cannot be underestimated.

For one thing, the “Services and Other”‘s revenue growth may inherently reflect the growth of the automotive sector.

Understandably, when Tesla delivered more vehicles, the company has to follow through with the services and maintenance of these vehicles, resulting in the expansion of the service business segment.

Chart of Tesla’s Revenue By Region

Tesla revenue by region

Tesla revenue by region

The chart above shows Tesla’s revenue breakdown by region into the United States, China, Norway and Netherlands.

Starting in 2020, Tesla has done away with the revenue breakdown for Norway and the Netherlands. Instead, it has lumped these regions into “Other” in the revenue breakdown as shown in the chart above.

As the chart shows, sales from the United States contributed the most revenue to Tesla all these years, indicating that the US has been by far the largest market for Tesla from 2015 to 2020.

In 2020 Q4, Tesla’s sales from the United States alone reached as much as $5.1 billion, a record high in 2020.

This figure is inclusive of Tesla’s automotive and energy segment revenues as well as other revenue sources in the United States.

Both Netherlands and Norway as well as other European countries contributed the 2nd largest revenue source to Tesla in 4Q 2020 at nearly $3 billion.

China claimed the 3rd place at $2.6 billion of sales in 2020 4Q.

Of all the regions, the sales from the United States and China grew the fastest, with China being the best performer when its 2020 4Q revenue grew more than 200% compared to the same quarter a year ago.

The rising revenue in both the U.S. and China throughout 2020 indicates a strong demand for Tesla’s products.

In this aspect, Tesla’s sales have not really been affected by the COVID-19 disruption which started in the early of 2020.

On the European side, we saw that Tesla’s sales in Europe started to pick up again in 2020 Q4 when it reported a $3 billion of revenue.

In short, Tesla reported the strongest sales growth in China in Q4 2020, with sales doubling on a year on year basis.

Tesla’s Revenue Sequential Growth

Tesla revenue QoQ growth

Tesla revenue QoQ growth

The chart above shows the quarterly growth rates of Tesla’s total revenue for the past 6 years from 2015 to 2020.

While most quarters in the chart show positive quarterly growth rates, there is still a handful of them with minor negative growth rates and most are in the low single digits except for 1Q 2019 quarter when revenue plunged by a large percentage at -37%.

The reason for the large drop in sequential growth rate was primarily due to the pull-forward sales of electric vehicles to 1Q19 from 4Q18 which was caused by the reduction in government subsidies (mostly California and Federal level) starting 2019.

Although government subsidies, largely in California, has been cut starting in 2019 and Federal Tax credits had been totally phased out, demand for Tesla electric vehicles has still been going strong as seen from the impressive double-digit quarterly growth rates in 2Q19 and 4Q19 at 40% and 17% respectively.

As of Q4 2020, Tesla’s total revenue grew as much as 22.5% sequentially, making it one of the best quarters with the most growth in total sales.

Tesla’s Total Revenue Year Over Year Growth

Tesla revenue YoY growth

Tesla revenue YoY growth

Similarly, the chart above shows the year over year growth rate of Tesla’s total revenue for the past 6 years from 2015 to 2020.

The results of the current chart are even more impressive considering that most quarterly results are positive and some of them have been in the triple-digit regions.

Year over year, Tesla’s revenue grew an impressive 45.5% in 2020 4Q, driven largely by strong vehicle volumes and higher energy deployment as mentioned in the previous discussion.

Conclusion

In the last 6 years, Tesla’s total revenue has grown at breakneck speed and reached nearly $11 billion as of Q4 2020, a record high for the company since its inception.

Other than revenue, Tesla’s gross margin has also expanded considerably since 2019 and reached 19.2% as of 4Q 2020 on a quarterly basis, driving profitability to a new high in the same quarter.

Overall, Tesla has managed to grow not only the revenue but also the gross margin in spite of the COVID-19 challenges throughout 2020, indicating the mass appeal of the company’s products even during a deteriorating economy driven by a devastating pandemic.

References and Credits

1. Financial figures for Tesla was obtained and referenced from quarterly and annual filings available in Tesla Investor Relationship.

2. Featured images in this article are used under creative commons license and sourced from the following websites: Paulius Malinovskis and CODE_n.

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{ 1 comment… add one }
  • Michael Edenedo November 25, 2020, 10:22 pm

    As Tesla continues to grow, and SpaceX successes become real, will it be merged into the company?

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