Tesla Inc. on Wednesday reported second-quarter net income of $104 million, marking its first string of four-consecutive quarterly profits, in spite of the ongoing coronavirus pandemic.
CEO Elon Musk also said the automaker has selected Texas for its next Gigafactory location.
While revenue dropped 5 percent year over year to $6 billion, the electric vehicle maker was aided by $428 million in regulatory credits sold to competitors, a figure that nearly quadrupled from the same period a year earlier and grew 21 percent from the first quarter.
Automotive revenue fell 4 percent to $5.2 billion. The company's automotive margin topped 25 percent for the second-straight quarter.
Tesla delivered 90,891 vehicles in the second quarter, down 5 percent from the same period a year earlier. Deliveries of the Model 3 sedan and Model Y crossover totaled 80,277, a 3 percent year-over-year gain. Model Y deliveries began in mid-March. Model S and Model X deliveries fell 40 percent to 10,614.
"Our business has shown strong resilience during these unprecedented times," Tesla said in a statement. "We believe the progress we made in the first half of this year has positioned us for a successful second half of 2020. Production output of our existing facilities continues to improve to meet demand, and we are adding more capacity. Later this year, we will be building three factories on three continents simultaneously."
Earnings were also aided by lower operating costs due to a temporary reduction in employee compensation as well as deferred revenue recognition related to a future self-driving system. Profits took a hit from factory shutdowns, and the company paid out $101 million to Musk that was part of a package approved in 2018.
Tesla CFO Zach Kirkhorn said Wednesday on an earnings call that the company expected regulatory credit figures to double in 2020 compared with 2019, but “eventually the stream of regulatory credits will reduce.”
Shares of Tesla, which had been on a recent tear, closed Thursday's trading down nearly 5 percent to $1,515.07
The site for Tesla's new factory outside Austin, Texas, will be open to the public and will be an “ecological paradise,” Musk said.
The plant will build Tesla's Cybertruck pickup, semitruck, Model Y and Model 3.
Officials this year delayed production of the semi until 2021. Tesla executives said Wednesday the first semis produced will be used internally to carry freight between locations.
Musk, in response to a question about demand for Tesla’s products, insisted on the earnings call that demand was not a problem, pointing to the fact the company increased deliveries in the first half of the year while the rest of the industry struggled, largely because of the virus. Still, Tesla has slashed prices in recent months.
Musk said he’d like to see prices drop further.
“The thing that bugs me the most about where we are right now is our cars are not affordable enough,” he said. “We need to fix that.”
Musk said the company would continue to improve its production systems -- an area of weakness in the past, particularly when it began building the Model 3.
“There’s far more opportunity for innovation in manufacturing than the product itself,” he said. “The long-term sustainable advantage of Tesla, I think, will be manufacturing.”
Tesla executives on the call said the company plans to expand on its insurance product, rolled out in California last year.
The automaker plans a telematics system that uses data captured in the vehicle and the driver’s profile to assess the probability of a crash and assess a monthly premium.
Executives said they hope to offer the product in a handful of states by the end of the year. The company did not disclose which states it’s considering.
“People can make a choice,” Musk said. “If they want to drive aggressively and in that case have higher insurance, or do they want to be more careful with their driving and pay less?”
Musk suggested Tesla could adjust the design of its vehicles and how they are repaired based off data from its insurance product.
“This gives us a great feedback loop for improvement,” he said. “We’re building a great, major insurance company.”