Tesla’s record sales in 2020 helped the Silicon Valley company turn its first annual profit, according to financial figures released Wednesday, though not by much. Aided by a fourth quarter that brought in $270 million in profit on $10.7 billion of revenue, Tesla finished 2020 with a $721 million in profit on $31.5 billion in total revenue.
To help get over the line, Tesla booked $401 million in regulatory credit sales in the fourth quarter of 2020. The company generates this money by selling these credits to automakers that make fewer clean vehicles than are required by the US government and the European Union. The credit sales have come in handy the past year and a half, as they’ve generated hundreds of millions of dollars per quarter for Tesla.
Tesla’s banner 2020 was bolstered by booming sales of the new Model Y SUV and increased success in the Chinese market after opening a factory there early in the year. Those developments, coupled with the continued success of the Model 3, helped Tesla absorb losing market share in Europe to the Volkswagen Group, which debuted multiple electric vehicles on its home continent last year.
Sustainable profitability had always eluded Tesla, in large part because the company spent much of its first decade trying to grow bigger. When the Model S sedan first went on sale, Tesla was already working on the more complex and more expensive Model X SUV. By the time that hit the market, Tesla had started work on the more affordable Model 3 sedan.
Tesla turned a slight profit in the third quarter of 2016, not long after the Model X hit the market. But Model 3 development put the company back in the red. Trouble with Model 3 production kept it there until things started to smooth out in the second half of 2018, allowing Tesla to turn back-to-back quarterly profits for the first time in what the company called its “most pivotal year.”
After two more quarters in the red to start 2019, Tesla has remained profitable ever since.
A stable business is a good thing for Tesla’s future, but the company’s performance was also rewarded mightily in the stock market in 2020. Its share price skyrocketed last year, making Musk the richest man in the world and Tesla the most valuable automaker.