Electric vehicle maker Tesla Inc. hit an annual production run rate of 1 million units for the first time late in the third quarter, executives said Wednesday, when the company reported operating margins of nearly 15%, more than three points higher than in the spring, on automotive revenues of more than $12 billion, which was nearly 60% higher than a year earlier.
CFO Zachary Kirkhorn told investors and analysts that the run rate mark was due in large part to a ramping up of operations at Tesla’s Shanghai plant. In all, the company produced nearly 238,000 vehicles during the third quarter versus about 145,000 units in the same period of 2020. Tesla executives – founder Elon Musk was not on the company’s conference call Wednesday – said the company is sticking to its goal of growing production 50% annually with a long-term goal of 20 million units per year.
Kirkhorn told call attendees that, despite hitting another deliveries record in the third quarter, Tesla also is battling the global supply chain disruptions. Backlogs are growing, he said, as are customer wait times, but the company is focused on cranking out more cars from the facilities it has. Tesla’s power storage business, he added, is facing similar dynamics.
Those obstacles didn’t make their way into Tesla’s better-than-expected Q3 numbers in a big way, however: Operating profits totaled $2.0 billion and operating margins came in at 14.6%. The automotive gross margin was 30.5%, up from 28.4% in the second quarter and 27.7% in 2020’s third quarter. The operating margin is right in line with a long-term target Tesla’s leaders have laid out in the past, and Kirkhorn said it’s likely to face some pressure in coming quarters both from price increases in commodities, labor and logistics as well as the company’s spending to ramp up the operations of its Austin factory.
“We’re very optimistic about the journey in the long term,” Kirkhorn said, noting that Tesla’s business will over time grow to include more higher-margin software revenues. “It’s just a little bit difficult in the next four of five quarters.”
Looking ahead, Tesla executives said they expect to bring to market early next year their first vehicles with more powerful 4680 battery cells. That technology is being tested now and meeting expectations, they said. Also moving forward – albeit rather more slowly than the company previously forecast – is the Cybertruck. The company, officials noted in their earnings report, is “making progress on the industrialization" of that vehicle but did not detail a production timeline.
Tesla shares (Ticker: TSLA) fell slightly after hours Wednesday. Year to date, they are essentially flat.