Tesla Hits Its ‘Best Quarter in History’ in Q3

After years in which making money seemed largely beside the point, electric car leader Tesla showed investors Wednesday that it can make substantial quarterly profits.

The company delivered a record number of cars in the third quarter, created a record $1.4 billion free cash flow and achieved record profitability, all while building three new factories on three continents. That marks a fifth consecutive quarter with net income, padding the company coffers with $14.5 billion in cash and cash equivalents.

"Q3 was our best quarter in history," CEO Elon Musk told investors on a call Wednesday afternoon.

The company built 145,036 vehicles, up 76 percent from Q2. It's still trying to hit 500,000 vehicles delivered this year, which would require another record quarter to round out 2020. Tesla delivered 318,980 vehicles in the first three quarters, leaving 181,020 to go in the last months of 2020.

The energy business breakdown

On the energy side, solar deployments jumped 111 percent to 57 megawatts, from a record-low 27 megawatts in Q2. Energy storage rose 81 percent over the last quarter to 759 megawatt-hours.

"Unprecedented demand" for the large-scale Megapack battery product has already outstripped supply through 2021, said energy business leader RJ Johnson. He added that the order book was already filling up through 2023, and that the residential Powerwall product also has a large backlog.

Overall, Tesla's stationary storage output is roughly doubling this year and doubling again next year, Musk said.

The solar roof team also reached a new landmark: being able to install its roof in less than two days. That follows a day or two of stripping the old roof, Johnson noted (Musk previously targeted an installation time of eight hours).

Johnson asserted that this long-awaited product could experience exponential growth, though the company has yet to release any hard installation numbers to quantify its reach so far. Solar roof installations nearly tripled sequentially compared to an unspecified baseline, according to Tesla's earnings slides.

The materiality of the product could stand in the way of exponential growth, though. Solar roof leader Carl Peterson said he's tackling a bottleneck in the form of training enough installers for the specialized tiles. Tesla is also fielding interest from third-party roofers to help grow installations, a decision the company first announced three years after initially launching the roof tiles.

Though Tesla looms large in the energy world, as one of the largest stationary storage suppliers and the owner of what used to be the largest rooftop solar installer, that business makes up a small part of its financial empire. Energy generated $579 million in Q3 revenue, compared to $7.6 billion in automotive revenue. And that energy revenue came at a cost of $558 million, yielding much thinner margins than in Tesla's automotive business.