When Will Tesla Make A Profit?

When Will Tesla Make A Profit?


Ram Chandrasekaran, Wood Mackenzie Principal Analyst in Transportation and Mobility, answers some frequently asked questions about US electric car manufacturer Tesla.

When will Tesla make a profit?

Let’s tackle the most frequently asked question first. Is Tesla making money? Despite strong revenue growth, Tesla has yet to make a profit.

And yet, Tesla has delivered on its promises, if a little slower than planned. Making a profit wasn’t part of its master plan in 2006 or 2016. In 2006, the automotive manufacturer focused on reinvesting in the business in order to make increasingly more affordable electric cars. And in 2016, reinvestment went towards developing the self-driving capability, solar roofs and battery storage as well as broadening the portfolio.

Tesla is targeting market share rather than profits in the mid-term. In Q3 2019, Tesla CEO Elon Musk said he’d like to capture 1% of global automotive sales, but didn’t say when he expected to achieve that goal.

Will Tesla make a small car?

Musk has said that Tesla could develop an entry-level car at a $25,000 price-point by 2022. Successfully launching such a product will increase its demand to 1.1 million cars a year by 2028, translating to 8 million BEVs in that timeframe.

There’s no indication of whether this vehicle will be smaller than the Model 3, which is already considered a compact car in the US but mid-sized in Europe and China. A smaller product may not perform as well in the US, but it could facilitate Tesla’s entry into the EU and China.

Where are the Tesla factories?

Tesla has three operational plants, all in the US. The facility in Fremont, CA., manufactures cars while the plans in Reno, NV., and Buffalo, NY., manufacture battery packs and solar panels respectively. The addition of the China and Berlin plants should provide enough capacity to achieve long-term sales targets. When complete, Wood Mackenzie expects Tesla to have a production capacity of 1.5 million cars per year.

Who makes Tesla batteries?

To match its production capability, Tesla will need 26% of forecasted global battery production by 2028. In November 2019, Tesla announced a deal with CATL to provide packs for its Shanghai plant, complementing its non-exclusive deal with LG Chem. The deal with CATL is agreed upon in principle but has not yet been finalised. Tesla is expected to use NMC811 packs in its China plants. The change in cell chemistry is not expected to have an effect on supply.

Panasonic was the sole battery provider at its Fremont and Reno facilities. However, disagreements over the Model 3 line with Panasonic lead Tesla to secure other sources of supply.

What are Tesla’s plans for the future?

The company is planning an aggressive roll-out of self-driving features that are more advanced than those offered by competitors.

However, it’s important to note that due to a lack of experience in automotive manufacturing, delays and quality issues are likely to become an issue. Early adopters of their products have overlooked these flaws but mainstream customers will not be as forgiving.

As of 1 January 2020, Tesla’s primary production is limited to the US, a country embroiled in trade wars with multiple trading partners. Once Tesla’s new factories are fully operational, the trade war is likely to be less of a concern.



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