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Breaking Down Tesla Total Revenue

Tesla Model S at a car show. Source: Flickr

The revenue is one critical variable that tracks the growth of a company. It is also an item in the financial report that can be the most difficult to manipulate. The management can easily cook up the expenses, the costs and all kinds of stuff in the financial statements, but not the revenue.

Yes, you can push out or pull in some recognition of revenue in a quarter or two but that’s just how far you can do it legally. Therefore, it’s meaningless to look at just one quarter or even a year of revenue for analysis purposes. With that said, it’s important to keep track of a company’s revenue growth for a certain period of time, preferably multiple years.

In this article, we will analyze the growth of Tesla (NASDAQ:TSLA) total revenue over 5 years. In this aspect, the year on year (YoY) and quarterly (QoQ) sales or revenue growth rates will be studied upon. Other than revenue, we will also look at the gross margin to find out the company’s profitability.

Before going into that, let’s take a look at Tesla’s financial statements to see where the sales or revenues came from. The following snapshot shows the revenue portion extracted from the income statement.

Tesla total revenue Q4 2019

Tesla total revenue Q4 2019

According to the snapshot above, Tesla’s total revenues come from a few business segments which are further elaborated below:

Tesla adds up all the sales from all business segments and arrives at a total sum of revenue as shown in the income statements. Having said that, I have created multiple charts below that break down and track Tesla quarterly revenue, revenue by segment and revenue by region.

These charts show how much money Tesla made and how profitable they were from the gross margin perspective. Let’s read on!

Chart of Tesla’s Quarterly Revenue

Tesla total revenue

Tesla total revenue

The chart above represents Tesla’s total revenue by quarter for the past 5 years from 2015 to 2020.

As seen from the chart, the plot shows just how much revenue has grown over the years. In this aspect, Tesla’s total revenue has grown from a mere $1 billion in 1Q 2015 to a staggering $6 billion in 2Q 2020. Of course, the growth has not been a bed of roses as there were hiccups along the way. For instance, revenues declined by as much as 40% in 1Q 2019 compared to the prior quarter but were still up year over year by 12.5%. So it was not that bad after all.

Basically, watch for the trend. A rising trend indicates a growing revenue and thus, a growing company. This is especially important for a growth company like Tesla. You may see revenue dropped in a quarter or two, but the long-term trend must be heading higher and this is what we are seeing in Tesla’s revenue plot above.

Nevertheless, Tesla’s total revenue reported in 2Q20 was $6.0 billion, representing a year over year decline of about 5%.

Chart of Tesla’s Revenue (TTM)

Tesla total revenue (TTM)

Tesla total revenue (TTM)

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

The TTM revenue plot looks a lot smoother than the quarterly revenue plot. On a TTM basis, Tesla’s revenue grew the most between 2018 and 2019.

The company’s TTM revenue reached the highest at $26 billion in 1Q20. Sequentially, Tesla’s TTM revenue declined slightly to $25.7 billion in 2Q20. However, the 2Q 2020 result still represents a YoY growth of around 3% on a TTM basis.

Chart of Tesla’s Quarterly Gross Margin

Tesla gross margin

Tesla gross margin

The chart above represents Tesla’s quarterly gross margin from 2015 to 2020. The gross margin is an important metric that measures the gross profitability of a company.

As seen from the chart above, Tesla’s quarterly gross margin has trended lower between 2015 and 2019, reaching the bottom at only 12.4% in 1Q19. However, the downtrend reversed in 2019 and the gross margin is seen ticking higher in 2019.

From 1Q 2019 onward, quarterly gross margin was seen rising and reached nearly 20% in Q4 2019. This expanding margin was a result of the increasing Model 3 deliveries and thus, higher sales.

The gross margin improvement persisted throughout 2020. As of Q2 2020, Tesla’s quarterly gross margin reached a record high of 21% since 2019. The company foresees that gross margin will further improve in 2020 and 2021 as a result of the new delivery for Model Y.

Chart of Tesla’s Gross Margin (TTM)

Tesla gross margin (TTM)

Tesla gross margin (TTM)

Similarly, I have created a trailing 12-month (TTM) gross margin plot above to smooth out the quarterly plot.

As the chart shows, Tesla’s gross margin is seen improving throughout 2019 and reached a record high at 19.8% in 2Q 2020 on a TTM basis.

Chart of Tesla’s Revenue By Segment

Tesla revenue by segment

Tesla revenue by segment

The chart above shows Tesla total revenue breakdown into several business segments. The respective business segments have been briefly mentioned at the start of this article.

As seen from the chart, the bulk of the sales came mainly from Tesla’s automotive sales which made up more than 80% of total revenue in Q2 2020. In the same quarter, the company’s automotive sales alone contributed roughly $5 billion of sales.

The lion share of the automotive sales revenue tends to make other business segments look insignificant in revenue contribution. As of 2Q20, none of the other business segments’ revenue has ever crossed the $1 billion mark.

This scenario shows just how critical the electric vehicles product or perhaps the Model 3, is to the company’s growth. At the same time, Tesla is dangerously walking on a fine line by counting on only a single product for growth. If the electric vehicles, specifically the Model 3, failed miserably, so will the entire company.

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 risk)

Fortunately, Tesla has already started to diversify its products such as introducing the Model Y which the company has already started delivering since 2Q20.

Tesla Revenue By Segment (Excluding Automotive Sales)

Tesla revenue by segment (excluding automotive sales)

Tesla revenue by segment (excluding automotive sales)

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

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

Based on the current chart, the “services and other revenue” has outgrown other business segments and became the largest revenue contributor among the 3 segments as of 2Q20.

The “Services and Other” business segment has been growing fast and reached nearly $500 million as of 2Q20. It even outpaced the energy product segment which was once touted as the 2nd most important business for Tesla after the automotive segment.

The growing importance of the “Services and Other” business segment is not a coincidence but has been anticipated along with the growing automotive sales. 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 this business segment.

In contrast, revenue from the energy business and automotive leasing has been sort of flat and may even be heading for a short-term decline as reflected by the flattening or declining revenue figures throughout 2020.

Part of the reason for the decline can be attributed to the fact that Tesla has been focusing all its resources on Model 3 and the lack of new products for leasing. For your information, Tesla has only started the leasing of Model 3 in 2Q 2019.

Chart of Tesla’s Revenue By Region

Tesla revenue by region

Tesla revenue by region

The chart above shows Tesla total revenue breakdown by regions into the United States, China, Norway and Netherlands. But Tesla has done away with the breakdown for Norway and Netherlands starting in 2020. Instead, it has lumped these regions as “Other” in the revenue segment.

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

As of 2Q 2020, the second place went to the combined revenue of the Netherlands and Norway at slightly more than $1.5 billion. After that, it was China in the 3rd place at $1.4 billion of sales in Q2 2020.

Having said that, the sales from the United States contributed the largest revenue portion to the company. As of 2Q 2020, US revenue reached as much as $3.1 billion but it was still far from the record high of $5.6 billion recorded in 4Q 2018.

The rising revenue in both the U.S. and China in 2Q20 shows that the demand for Tesla’s electric vehicle products has been pretty strong and was far from being affected by the COVID-19 disruption.

On a year over year basis, we saw that Tesla’s European sales plunged the most at more than 20% from $2.2 billion in 2Q19 to $1.5 billion in 2Q20.

Tesla reported the strongest sales growth in China in Q2 2020 at more than 100% on a year on year basis which is highly unexpected considering the country’s ongoing effort in battling the COVID-19 outbreak.

Tesla’s Total Revenue Sequential Growth

Tesla revenue sequential growth

Tesla revenue sequential growth

The chart above shows the quarterly growth rate of Tesla’s total revenue for the past 5 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 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 2Q 2020, Tesla’s total revenue sequential growth was only 0.8%, which was pretty good considering that other automobile companies such as GM saw its revenue plunged by double-digits as a result of the COVID-19 outbreak.

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 5 years from 2015 to 2020.

The results of the current chart are rather impressive as most quarterly results show positive growth rates and some of them are even in the triple digits regions.

However, Tesla’s YoY total revenue growth reported -5% in 2Q 2020. The decline may have been caused by the COVID-19 pandemic which has probably made a dent in the demand for the company’s flagship products, especially in the U.S and Europe as seen from the prior discussion.

We will see if the decline was a one-time event or will persist for a longer period.

Conclusion

Tesla’s revenue in 2Q20 was flat compared to the prior quarter but represents a YoY decline of 5%.

Tesla’s stagnating revenue growth in 2Q20 was largely driven by the lower sales in the U.S. and Europe which saw their sales plunging year over year. The revenue decline was especially devastating in Europe when sales dropped more than 20% on a year on year basis.

However, Tesla saw its sales growing by more than 100% in China in 2Q 2020 when the reported revenue surged to $1.4 billion.

Despite flattening revenue growth in 2Q20, Tesla’s gross margin grew to a new high at 21% and 19.8% on a quarterly and TTM basis, respectively.

References and Credits

1. Financial figures for Tesla was obtained from 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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