Elon Musk, founder of Space Exploration Technologies Corp.- SpaceX, joins President Donald J. Trump at a launch briefing in preparation for the launch of the SpaceX Falcon 9 rocket with the Crew Dragon vehicle Wednesday, May 27, 2020, at the Kennedy Space Center in Cape Canaveral, Fla. (Official White House Photo by Shealah Craighead)

Analysts are boasting about Tesla’s strong gross margins, but are they sustainable? With seemingly every major automaker and other major manufacturers like Foxconn, and untold numbers of startups getting into the electric vehicle business, how long can Tesla maintain its dominance in the market? In the long-run, are Tesla’s high margins possible in a business with such low barriers to entry? Rebecca Elliott reports in The Wall Street Journal:

Tesla Inc. TSLA +2.91% notched a third consecutive record quarterly profit, thanks in part to the electric-vehicle maker’s ability to navigate persistent global supply-chain disruptions.

The strong earnings came after Tesla delivered roughly 73% more vehicles than in the year-ago period. Underpinning that growth was an uptick in sales of vehicles made in China, now home to Tesla’s largest auto plant by output.

The company on Wednesday said it also benefited from cutting some expenses. The efficiency gains, combined with greater vehicle output, more-than offset higher supply costs and other factors, including a reduction in the average price of the vehicles the company sold in the period.

The car maker reported a $1.6 billion third-quarter profit, up from $331 million a year earlier, on record revenue of $13.8 billion. The results beat Wall Street expectations of a profit of around $1.3 billion and $13.6 billion in revenue.

Tesla is more vertically integrated than many auto makers, helping the company navigate the chip shortage more smoothly than some of its competitors, analysts said. Supply chain problems still took their toll.

“Due to parts shortages and logistics variability, we have not been able to run our factories at full capacity,” Tesla Chief Financial Officer Zachary Kirkhorn said on an analyst call, adding that customers are having to wait longer for vehicles.

Mr. Kirkhorn said the company needs to continue pushing to lower outlays given rising commodity and labor costs. “We have to overcome cost increases that are outside of our control,” he said.

Analysts expect Tesla’s vehicle deliveries to continue to climb in the current quarter to around 266,000, according to FactSet—positioning the company to hand over nearly 900,000 vehicles to customers in 2021. The company has said it is aiming to increase deliveries by more than 50% over last year’s total of nearly half a million vehicles.

Tesla is aiming to lay the groundwork for further growth by starting to produce vehicles at two new factories by the end of the year, one in the Austin, Texas, area, where the company is moving its headquarters; the other outside Berlin.

However, Mr. Kirkhorn said Tesla doesn’t expect to deliver vehicles produced at either factory to customers this year. “It’s possible the stars align and things move quickly. It’s possible that we’re spending the bulk of next year working on ramping these factories. It’s just very hard to say,” he said.

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