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Chart in Focus: Tesla’s 2Q17 Gross Margin

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Tesla’s gross margin in 2Q17

In the previous part, we saw how a rise in Tesla’s (TSLA) car deliveries and higher revenues from energy products boosted its 2Q17 revenues. Along with higher deliveries, Tesla also continued to expand its production capacity. The company produced about 25,708 units with YoY (year-over-year) growth of ~40%. Now, let’s analyze Tesla’s 2Q17 gross margin.

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2Q17 gross margins expanded

In 2Q17, Tesla’s (TSLA) consolidated gross profits stood at $667 million with a gross margin of 23.9% on a GAAP[1. generally accepted accounting principles] basis. This gross margin demonstrated a handsome expansion from its gross margin of 21.6% in 2Q16.

Tesla’s 2Q17 GAAP consolidated gross margin was higher than its gross margin of 23.6% in 1Q17.

Key drivers

In 2Q17, Tesla’s gross margin from its Automotive segment stood firm at 27.9% compared to 27.4% in 1Q17 on a GAAP basis. However, it declined to 25% in 2Q17 from 27.8% in 1Q17 on a non-GAAP basis. In 1Q17, Tesla’s non-GAAP gross profits included one-time profits from its Autopilot software.

Tesla’s gross margins from Model X are comparatively lower than its margins from Model S. This difference primarily results from production efficiencies that the company has achieved for Model S but that have yet to be achieved in the case of Model X.

Nevertheless, TSLA’s gross margin is still higher than those of legacy automakers (FXD) such as Ford Motor (F), General Motors (GM), and Fiat Chrysler (FCAU).

In the next part, we’ll take a quick look at some other key highlights of Tesla’s 2Q17 earnings event.

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