Is Tesla’s Profitability A Mirage?

Published on: 05/10/2021

In this edition of Chart Talk, Tony Ogorek and Jeff Viksjo discuss where Tesla is getting its earnings from and here’s a hint: it’s not from the sale of cars.

TRANSCRIPT:

TONY:

Welcome to this edition of Chart Talk.  I’m Tony Ogorek, I’m here with Jeff Viksjo, and today we are going to be talking about Tesla and whether its earnings are in fact a mirage.  So Jeff, let’s take a look at this first chart, its Tesla’s quarterly net profit and we’ll see that the company has not been profitable in ‘16, ‘17, ‘18, a little bit of stuff in ‘19, not a whole lot in ’20, and it’s been getting some momentum. But in 2021, they’ve had their most significant profit.  From our perspective, how they got it, was incredibly weird.

JEFF:

It’s worth pointing out that Tesla is now worth $650 Billion dollars, which is almost exactly five times the combined value of Ford and GM.  And if you look at this chart, profits are increasing that would seem to support it, but if you look under the hood at what is driving earnings, it’s really, they have made $433 Million in quarterly profit record last quarter, 100% was from selling emissions credits. Because Tesla has an all-electric vehicle lineup they accumulate the credits and they sell them to other auto makers that need them.

TONY:

I like that ‘look under the hood’, that was very slick.  Let’s take a look at our next chart here, and this takes a look at the quarterly review from sales of emission credits.  This has nothing to do with the cars that they’re selling, in a sense, it’s the emission credits that other manufacturers have to buy because they are not able to do that.  That has been zooming.  It has been the most significant part of their supposed earnings this past quarter.  Let’s talk about Bitcoin for a sec, which also played a role.

JEFF:

Elon Musk hasn’t been shy about promoting cryptocurrencies.  Tesla did get into Bitcoin.  They added Bitcoin to their balance sheet and they did sell some during the quarter for profit.  That profit was about $100 Million, or a fourth of their overall profit.  So, between the EV credits and the Bitcoin, none of their profits is from selling cars.

TONY:

Yeah, so it’s pretty amazing.  Most people think of Tesla as a company which is manufacturing cars and their profit is coming from the manufacturing of cars.  But in fact that is not the case.  It’s coming from selling Government tax credits and its coming from Bitcoin.  So, hopefully, they can turn it around at some point, but right now they are not earning anything off the manufacturing of their vehicles.

Hopefully you’ve enjoyed this edition of Chart Talk!  Jeff and I both look forward to seeing you soon.

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