Tesla (TSLA) is now earning eight times more per automotive than Toyota, they usually are beginning to notice back in Japan.
The list of things that might have led to Tesla’s demise was longer than my arm. For many investors, the sum of money that the corporate was losing was at the highest of that list.
Not only is it not on top anymore, it’s not even on the list.
Over the past two years, Tesla has been capable of consistently deliver profits every quarter with increasingly impressive free money flow, which reached a record of over $3 billion last quarter.
For years, many automotive investors decided to take a position in legacy automakers as a substitute of Tesla because they might deliver hundreds of thousands more vehicles than Tesla and earn a living doing it.
While it’s still true that a few of the biggest automakers, like Toyota, deliver hundreds of thousands more vehicles than Tesla, it’s not true that they necessarily earn more money doing so.
For instance, Tesla reported $3.29 billion in net profit last quarter in comparison with Toyota earning 434.2 billion yen (roughly $3.15 billion USD). That’s despite Toyota delivering almost eight times more cars than Tesla through the same time.
This milestone of Tesla beating Toyota in earnings during 1 / 4 is particularly impressive once you consider that only a decade ago, Toyota owned about 3% of Tesla with only a $50 million investment. Now Tesla generates $50 million in free money flow almost every other day.
Toyota divested and completely cut ties with Tesla in 2017.
While Toyota remains to be only tentatively entering the battery-electric vehicle space, persons are beginning to see times changing in Japan because the Nikkei, the country’s biggest business newspaper, led with “Tesla earns 8 times more profit than Toyota per automotive.”
While it’s making waves in Japan, it looks like the Japanese auto industry might still have their head within the sand.
That’s partly because Tesla beating Toyota on earnings is partially as a result of the latter seeing earnings go down as a result of “increased material and electricity costs for its suppliers.”
But personally, I believe the trend of Tesla catching as much as Toyota’s earnings is likely to be one that may keep going. To me, it’s so simple as one producing compelling all-electric vehicles in large volumes while the opposite isn’t.
Now that trend may not currently be reflected in Tesla’s stock price, but that’s one other story entirely.