Tesla extended its earnings streak for an eighth consecutive quarter, the longest stretch of profitability in company history, posting the highest net income in company history on higher sales of Model 3 and Y electric vehicles and, as always, lucrative pollution credits.
The Palo Alto, California-based company led by billionaire entrepreneur Elon Musk said net income for the quarter that ended June 30 was $1.12 billion, a tenfold increase from $104 million a year ago. Earnings per share were $1.02, beating a consensus expectation for net income of $600 million, according to FactSet. Sales for the quarter that ended June 30 were also a best-ever $11.96 billion, nearly double the $6 billion of the year-earlier quarter. Analysts expected $11.4 billion.
Sales of electric vehicles grew significantly in the quarter to 201,250, though the company’s sales of pollution credits needed by other automakers to comply with California, U.S. and European emissions rules were below the levels of a year ago and 2021’s first quarter. That particularly impactful source of revenue—it’s essentially free money—was down 17% from a year ago at $354 million and totaled $872 million for the first half.
“In the second quarter of 2021, we broke new and notable records. We produced and delivered over 200,000 vehicles, achieved an operating margin of 11.0% and exceeded $1B of GAAP net income for the first time in our history,” Tesla said in a statement. “Public sentiment and support for electric vehicles seems to be at a never-before-seen inflection point.”
The first half of the year saw production expand globally owing to the continued ramp-up of sales in China, a year after Tesla began building Model 3s in that market at its Shanghai plant. Still, “supply chain challenges, in particular global semiconductor shortages and port congestion, continued to be present in Q2,” the company said. “With global vehicle demand at record levels, component supply will have a strong influence on the rate of our delivery growth for the rest of this year.”
Despite delays with its new German plant, the company said it remains “on track to build our first Model Y vehicles in Berlin and Austin in 2021.” The addition of both plants will further supplement its main Fremont, California, plant and eventually give the company the ability to produce a million or more vehicles annually worldwide. This year volume growth “will skew toward the second half of the year,” CFO Zachary Kirkhorn said in a conference call, contingent on adequate supplies of key components.
“We estimate Fremont production accounts for 80-90% of Tesla’s non-China sales,” Morgan Stanley analyst Adam Jonas said in a research note. “We believe investors may be overlooking the impact to Tesla margins when the Austin and Berlin factories (which should feature significantly lower costs)…