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The result was achieved “despite enormous difficulties,” executive leader Elon Musk said, adding a factory closure and a decline in sales.
By Neal E. Boudette, Peter Eavis and Matt Phillips
Tesla reported a $104 million gain on Wednesday, a result that analysts, who expected the electric car manufacturer to lose cash as the coronavirus pandemic pressed the company on two fronts.
Sales by the time of the quarter, which ended in June, slowed as much of the economy closed and millions of others lost their jobs and cut spending. And for about two months, the company was forced to prevent production at its main plant in Fremont, California.
Gains were made “despite the enormous difficulties of the quarter,” the company’s executive leader, Elon Musk, said in a conference call with analysts. “We were able to achieve a successful fourth consecutive quarter. Although the automotive industry declined by about 30% year-on-year, we managed to increase deliveries in the first part of the year.”
Tesla said second-quarter profits fell between five and six billion dollars. Total car sales fell five to around 91,000 cars, an update to initial figures previously released this month.
Tesla turns out to be more pandemic resistant than other automakers. In China, the world’s largest electric vehicle market, the company benefited from a new plant near Shanghai that began production late last year. The plant allows Tesla to set the price lists China imposes on imported cars and has made its cars more affordable for Chinese consumers.
Tesla has begun painting a fourth car plant near Austin, Texas, Musk said.
The plant will produce Tesla’s new electric pickup truck, the Cybertruck, and a new semitrailer, such as the Model 3 and Model Y, which it already manufactures at a San Francisco area plant. The new plant represents a really important investment for Tesla.
The company’s profit was also made imaginable through the sale of $428 million in issuance credits to other automakers who want them to meet regulatory standards. This is almost 4 times more credits than in the same quarter last year.
Tesla said it ended the quarter with $8.6 billion in cash, $535 million more than at the end of March.
Musk’s refund is largely based on the functionality of Tesla’s shares. And because the percentage value of the automaker has skyrocketed in recent weeks, it is expected to get a percentage award value of around $2 billion.
Prizes are part of a refund package, established in 2018, to lose stock in 12 installments as certain milestones are achieved (market position price and operating measures such as earnings or a profit measure). The first payment under this plan was made in May and now it is also priced close to $2 billion.
Tesla’s market value recently exceeded $150 billion on average over the past six months and over the last 30 trading days, the threshold for the release of the second batch of shares. And it had already hit the lowest profit goal without considering the company’s second quarter results, in theory giving Mr. Musk the operational achievement he needs to get the shares, though the board still has to release the award. If Tesla’s share price stays close to current levels, Mr. Musk might even qualify for the third tranche of his stock awards this year.
Critics of the 2018 payment program have questioned why it is necessary. Prior to the award, Musk already owned a giant part of Tesla, shares that are now worth around $60 billion. That’s more than double the $25 billion in shares Musk has in the 2018 package. Jeff Bezos of Amazon, another visionary CEO, did not want billions of dollar payment systems to motivate him, as he led his company to a dominant force in the U.S. economy.
Tesla’s wonderful profit made it a major milestone: a possible inclusion in the S.P.500 index. The index is one of the highest measures of U.S. stock market functionality. More vigilanized, with more than $11 trillion in mutual budget and other investments that oppose it.
It’s for corporations with a market price as high as Tesla that they don’t include in the S-P 500. But the company’s inability to generate profits has consistently made it ineligible so far. (The inclusion criteria require that the sum of the company’s fully audited profits during the last 4 quarters be positive).
If Tesla were included in the index, it could cause an increase in its percentage value by boosting strong demand from institutional investors. The index budget (cheap investment cars that are meant to reflect the functionality of indices such as the SP 500, rather than seeking to “beat the market”) will have to buy all the shares included in the index, which will create a race towards the percentages of new companies added.
“When a company comes in, it means a lot of shopping there,” said Howard Silverblatt, a senior index analyst at Dow Jones Indices, the company that publishes the S-P 500.
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