Tesla Sets Gross Profit Margin Target at Porsche’s Almost Unheard of 50%

4 years ago by Eric Loveday 6

Tesla Model S On The Open Road

Tesla Model S On The Open Road

Tesla Motors’s CEO Elon Musk dreams big.  That’s the way he rolls.  But who can blame him when Tesla seems to somehow be capable of constantly confirming that his dreams will someday become a reality.

Tesla CEO Musk Talks About...Well, Everything At 2013 Annual Shareholder Meeting On June 4th, 2013

Tesla CEO Musk Talks About…Well, Everything At 2013 Annual Shareholder Meeting On June 4th, 2013

So, here’s Musk’s next big dream: to achieve a gross profit margin of somewhere in the neighborhood of 50%.  That’s Porsche territory and is a figure that’s basically unheard of in much of the automotive world, but that hasn’t prevented Musk from saying that’s where Tesla is headed.

Musk says Tesla can easily increase its production efficiency, thus increasing profits.  In fact, Musk predicts the automaker will hit a 25 percent gross margin this year.

Quoting Musk, who spoke at Tesla’s shareholders meeting in Mountain View, California last week:

“I would expect our capex to be higher than Porsche’s for some time to come.  On gross margin, I think we can get close to exceeding Porsche’s over time.”

According to SF gate, “Capital expenditures to expand Model S production and begin assembling the electric Model X sport-utility vehicle next year will hold back Tesla’s profitability, compared with that of Stuttgart, Germany-based Porsche.”

But at some point those expenditures will dwindle and Tesla will target Porsche’s gross profit margin of 50%, which the German automaker reported for the past few years prior to when it was acquired by Volskwagen.

Tesla has a ways to go though as its gross profit margin the Q1 of 2013 was 17 percent.

But as we stated in the opening graph, Musk and Tesla seem to always find a way to hit optimistic targets.

Source: SF Gate

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6 responses to "Tesla Sets Gross Profit Margin Target at Porsche’s Almost Unheard of 50%"

  1. David Murray says:

    I could see this, maybe, on the Model-S. But somehow I doubt this would be the case on the lower priced model they hope to bring out in a few years.

  2. kdawg says:

    Does that include 50% margin on spare parts? Didn’t Elon say they do not want to make money off of service, which to me includes spare parts.

  3. Taser54 says:

    I presume this includes the sales of zero emission vehicle credits, which will evaporate over time.

  4. Dave R says:

    They need high gross margins to pay for SuperChargers, showroom and service centers.

    Also judging by the number of quality issues popping up on the TMC forums, they still have a ways to go in the QC department so they can reduce warranty costs before they can really focus on gross margins.

  5. Dave K. says:

    Automakers typically have higher margins on more expensive cars, and often barely break even on entry level ones. That’s the beauty of Tesla’s strategy, make the high margin cars first, and use the profits to move down market. Seems to be working.
    I love this guy! He just keep delivering.