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