Profit per Tesla car is 8 times higher than Toyota, how did Elon Musk operate his car company to surpass the big man?

A recent Nikkei Asia analysis found that Tesla made eight times more profit per car than giant Toyota in the third quarter. This gave the US electric-car maker the lead in terms of sales. first quarterly net profit since it started operating in 2010.

Tesla reported a net profit of $3.29 billion in the third quarter while Toyota posted $3.15 billion. The Japanese automaker is currently facing challenges from raw material suppliers. Higher raw material costs pushed quarterly operating profit to 450 billion yen ($3.07 billion).

Toyota’s decline is partly due to unusual factors. The automaker is now reducing the increased cost of raw materials and electricity for its suppliers. Higher raw material costs, including support for suppliers, cut quarterly operating profit by 450 billion yen ($3.07 billion).

Kota Yuzawa, an expert at Goldman Sachs Japan reassured that: “The fall in profit in the third quarter does not mean a decrease in Toyota’s real earnings potential. Toyota leads in operating profit, or $4.08 billion versus Tesla’s $3.69 billion.”

Even so, Tesla has become one of the most profitable automakers in the world. Although their net profit in the third quarter still fell behind Mercedes-Benz, they still outperformed both BMW and Volkswagen as their net profit margin hit 15% in the quarter.

Tesla’s success largely stems from its profit per vehicle. Toyota Corporation sold 2.62 million vehicles in the quarter, 7.6 times Tesla’s 344,000. However, Toyota’s net profit per car was only about $1,200, one eighth of Tesla’s $9,570 per car. Tesla is said to lead the industry in terms of net profit per vehicle sold, even outpacing rivals like Mercedes-Benz.

Tesla’s earnings per vehicle have grown rapidly since Q2 2021. Investors have responded positively to the company’s gains and market capitalization, which has nearly tripled. times Toyota, reaching about 655 trillion USD.

This gap is the result of different strategies pursued by the two automakers. Toyota offers a wide range of vehicles from gasoline-powered cars to hybrids, electric vehicles, etc., with different sizes and prices. Meanwhile, Tesla only focuses on electric vehicles. The Model Y and Model 3 models make up more than 90% of the company’s sales, which have nearly doubled in two years despite their relatively high prices. Even the cheaper Model 3 starts at around $40,000 in the US.

Confident in the appeal of its brand, Tesla did not hesitate to raise prices to pass on higher material costs to customers. They were also ahead of the competition when they started offering self-driving software to users, and the software business also flourished.

“The biggest factor behind Tesla’s profit growth is sales volume, followed by price increases and sales of self-driving software,” said Koji Endo, an expert at SBI Securities.

Tesla now operates Giga Press technology to reduce the necessary assembly steps, helping to speed up mass production. Teslas also sell their cars online, a more profitable method than selling through dealers.

Electric vehicles are becoming more and more popular faster than experts predicted. The Boston Consulting Group said in June that electric vehicles’ share of global new-vehicle sales would reach 39 percent by 2030, bringing the estimate the company made a year earlier to 11 points.

Toyota has set a target of selling 3.5 million electric vehicles by 2030, but for now the bZ4X is its only mass-produced electric model. A top Toyota official said at an earnings conference on November 1 that the automaker is exploring other options for mass-producing electric vehicles.