Tesla: 1Q20 revenue increased 38% year-on-year, with strong performance in the Chinese market

According to Tesla's first quarter 2020 financial report, although the Chinese market in February and the U.S. and overseas markets in March were affected by the epidemic, Tesla achieved positive profits in the off-season for the first time thanks to strong sales and deliveries in the Chinese market. After deducting regulatory credit income, Tesla's gross profit margin in the first quarter was 20%.

Tesla's car sales revenue in the first quarter was US$5.132 billion, a year-on-year increase of 38%. The gross profit of cars increased by 75% year-on-year to US$1.311 billion, with a gross profit margin of 25.5%.

In the first quarter, Tesla delivered 88,496 vehicles, a 40% increase over the same period last year. Among them, Model 3/Y delivered 76,000 vehicles, a 50% increase over the same period last year, and Model S/X delivered 12,000 vehicles, a 1% increase over the same period last year.

After launching Model 3 three years ago, Tesla has been launching new products faster and achieving profitability at a faster pace. At the Fremont plant, the number of Model Ys produced in the first quarter exceeded the first two quarters of Model 3. Model Y has achieved positive profits in its first production quarter.

Model Y production in Shanghai and Berlin is proceeding as planned, and progress is being made in increasing the production capacity of the Fremont Model Y and the Model 3 at the Shanghai factory.

Recently, the Shanghai plant has maintained normal operation and has continued to contribute cash and profits. The Fremont plant is preparing to restart production as soon as possible.

In terms of autonomous driving, Tesla released a software upgrade for traffic lights. Once the system is activated, it can recognize traffic lights and stop signs, and then automatically slow down to stop. When the light turns green again, the driver only needs to pull up the autopilot lever or lightly step on the accelerator pedal.

In terms of battery life, software upgrades have increased the range of the Model S and X to 391 miles and 351 miles, respectively.

The energy business was impacted by the shutdown in the first quarter, with fewer installations. Tesla is also facing efficiencies in the expected rollout of the third version of the Solar Roof, which has impacted the overall profit of the business.

Despite the shutdown-related expenses in the first quarter, after deducting the impact of regulatory credits, the automotive business had strong gross margins across all products. Free cash flow was temporarily impacted by production and delivery delays. Without these impacts, Tesla would have had stronger delivery and free cash performance.

Localized manufacturing in the Chinese and European markets will reduce costs and make products more competitive

Since the fourth quarter of last year, the profit of Model 3 in Shanghai factory has increased significantly, approaching the level of Fremont Model 3s, and this was achieved even though the factory was not running at full capacity and was shut down in February. The long-range version and performance version of Model 3 were released. Through local production, Shanghai Model 3 has greatly improved its capital turnover cycle.

In the first quarter, the cost of automobile manufacturing in the Shanghai factory was lower than that of Model 3 in the Fremont factory, and there is still a lot of room for cost reduction. For example, higher production will lead to a reduction in fixed cost amortization, and the supply chain will be fully localized. Currently, most of the supply chain has been localized, but not all of it, and there are still great opportunities.