A significant part of Tesla’s growth in gross profit last quarter came from an increase in profits from servicing Tesla’s vehicles and selling energy through its Supercharger network – things Elon Musk said Tesla wouldn’t aim to make profits from.
Back in 2016, Elon Musk was quoted saying this at a Tesla event when defending the automaker’s strategy to operate its own service centers rather than using dealerships:
Our philosophy with respect to service is not to make a profit from service. I think that it’s terrible to make a profit on service.
Musk often criticized other automakers, specifically GM, for selling “cars that then need service” at dealerships and then making a lot of profits selling replacement parts to customers through those dealerships.
The CEO is often quoted saying, “The best service is no service,” and Tesla aims to improve service by increasing the reliability of its vehicles, resulting in less need for service.
Reality is quite different. Tesla owners are often experiencing long wait times to get service appointments at Tesla and how the automaker plans to address this situation was a top question during Tesla’s earnings call yesterday.
As for the Supercharger network, Musk also said that it would “never become a profit center” for Tesla.
The CEO always said that the goal was of the charging network was to be a service for Tesla owners, and now non-Tesla owners, with the goal of revinesting revenue into growing the capacity of the network.
Tesla’s reality is changing
Over the last two quarters, Tesla’s profits from “services and others” have surged.
For the last few years, Tesla’s services and others were only marginally profitable, which was in line with Musk’s previously stated strategy on that front, but something has changed.
With Tesla’s Q3 2024 financial results, the automaker that “services and others” gross profits jumped to almost $250 million – a 90% increase year-over-year:
Tesla is one of the most opaque automakers when it comes to breaking down its financials. It bundles many things into “services and others, ” making it hard to know exactly what is going on inside.
The bulk of that accounting line has historically been car service and used car sales, but in Tesla’s latest financial results, which saw an important increase in profits for “services and others”, the automaker confirmed that the surge was specifically due to its Supercharger network and service margins:
The Services and Other business achieved a record gross profit in Q3, growing over 90% year-on-year. Sequential growth in gross profit was driven mostly by higher gross profit generation from supercharging, service center margin improvement and higher gross profit generation from Parts Sales and Merchandise.
Now at $~250 million, it’s still a small part of Tesla’s overall gross profits, but it does account for a significant part of the ~$800 million increase in gross profits compared to last year.
Electrek’s Take
This is something that irritates me personally because I’ve used those quotes from Elon about service to counter the hesitation of many potential Tesla buyers regarding the maintenance and service of electric vehicles.
Elon’s statement reassured them, but if that was ever really the plan, it certainly isn’t anymore based on the latest results.
Tesla’s gross margins for service and selling replacement parts are surging, and Tesla is proudly saying it in its financial results.
Myself, I have two Tesla vehicles that need service right now and Tesla is trying to sell me very expensive parts.
As for Supercharger, prices are going up.
To be fair, Tesla making money on the Supercharger network is quite new and the company is just starting to sell more charging to non-Tesla EVs. It’s very possible that Tesla might need to adjust to keep the Supercharger just marginally profitable.
It’s just the fact that Tesla writes “sequential growth in gross profit was driven mostly by higher gross profit generation from supercharging,” it’s not super encouraging.
But in the meantime, some Supercharger stations are getting quite expensive. Hopefully, Tesla gets those prices into control
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If you haven’t noticed, Genesis is quickly making a name for itself in the US. The luxury automaker now has 60 sales outlets as it expands into new US states. With new EVs launching, Genesis is eyeing a bigger share of the US luxury market.
Hyundai Motor Group’s Genesis brand is quietly emerging as a powerhouse in the US luxury market. Genesis marked its entry into the luxury segment in 2008 as a Hyundai-branded model.
In 2015, Hyundai announced Genesis would become an independent luxury brand. Since launching its first vehicle in the US, the luxury brand’s sales have surged from 7,000 in 2016 to over 69,000 last year. It even outsold Nissan’s Infiniti.
According to Genesis, this is just the start. The Korean luxury brand wants an even bigger slice of the market as it eyes rivals like Porsche.
A big reason behind the brand’s confidence is its new lineup of stylishly electric models. Genesis sells three EVs in the US: The GV60, Electrified G80, and Electrified GV70.
After introducing the Electrified GV70 just last year, the electric SUV is already Genesis’ top-selling EV in the US. According to Kelley Blue Book, Genesis sold 2,343 electric GV70 models in the US through September.
Genesis eyes a bigger share of the US luxury market
Altogether, the luxury brand’s EV sales reached over 4,600 through the first nine months of 2024, topping Porsche (4,291) and Volvo (3,644).
Genesis made a statement at the LA Auto Show, unveiling the updated 2026 Electrified GV70. The luxury electric SUV now includes more range and an NACS port so drivers can charge at Tesla Superchargers. It will go on sale in the first half of 2025.
Meanwhile, Genesis showcased its new GV60 Magma Concept at the event, its first dedicated high-performance EV. The brand sees its Magma performance brand rivaling that of Geman luxury brands like Mercedes AMG, BMW M, and Audi RS.
The Genesis GV60 Magma EV will launch next year, spearheading the brand’s “expansion into the realm of high-performance vehicles.”
Genesis enhanced the battery and motor while fine-tuning the chassis, thermodynamics, and profile for more power and efficiency.
It also features an aggressive new design, sitting much lower and wider than the current GV60 model. Genesis added a Magma-exclusive sound system to give it a sports car-like feel in the cockpit.
In April, we got our first look at the G80 EV Magma concept, which could be a potential challenger to Tesla’s Model S Plaid and the Porsche Taycan GT Turbo.
The luxury brand is expected to launch its flagship electric three-row SUV next year, the GV90. Genesis previewed the ultra-luxury EV in March after unveiling the Neolun concept.
Genesis now has 60 sales bases in the US, with new stores in Washington, Minnesota, New York, and Florida. It’s also building 30 in Canada as it expands its presence in the North American luxury market.
The luxury brand is opening a new dedicated design center in California. The “Genesis Design California” will open in the first half of 2025 as it builds out its US network.
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A rumor spreading like wildfire on social media claims BYD will be taking over NIO (NYSE: NIO) as the EV giant gobbles up market share in China. The rumor was posted by a suspected BYD employee, but NIO is denying the claim.
BYD acquiring NIO would be a massive move as China’s leading EV maker continues to dominate the market. But that’s not going to happen.
According to CnEVPost, NIO’s assistant vice president for branding and communications, Ma Lin, denied the rumors that BYD is taking over the company on Friday.
Ma posted a screenshot on social media asking BYD’s general manager of branding and PR, Li Yunfei if the person who posted the fake rumor was an employee.
Earlier today, the suspected employee claimed BYD and NIO were setting up a joint venture. In a Weibo post, the suspect said BYD would have majority control of the partnership with a 51% share while NIO would get the remaining 49% ownership.
Ma told Li that if it was, in fact, a BYD employee, he needed to issue an official clarification and apologize. If not, they can get the police involved together. Li also denied the rumors, saying the claim was seriously untrue.
NIO denies rumors that BYD is taking over the company
This is not the first time rumors surfaced that BYD will be taking over NIO, but because it is a suspected employee, the post has garnered more attention.
BYD is on a major hiring spree as it ramps up production to meet the higher demand. The EV giant now has over 900,000 employees, making it by far the largest A-share listed company in China.
After selling over 500,000 vehicles for the first time in a single month in October, BYD’s surge is heating up as the EV giant expands overseas for growth.
October was BYD’s fifth consecutive record sales month as it closes in on auto leaders like Ford in global deliveries.
NIO is also gaining momentum, with sales topping the 20,000 mark for the sixth straight month in October. With output of its new lower-priced Onvo L60 electric SUV ramping up, NIO expects to continue seeing higher demand.
Ma said on Friday that NIO’s “recent situation is quite good.” The company’s head of PR added, “Cash flow turned positive in the third quarter, gross profit improved in October, earning an extra RMB 100 million, and Onvo (deliveries) will exceed 10,000 in December.”
NIO is launching its third brand, Firefly, with deliveries kicking off in the first half of 2025. The company expects sales to double next year as it works to become profitable by 2026.
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Hyundai Motors is recalling 145,235 EVs and other “electrified” vehicles in the US, citing concerns about a loss of driving power, the National Highway Traffic Safety Administration (NHTSA) said on Friday.
The NHTSA announced this morning that the recall affects selected IONIQ 5 and IONIQ 6 EVs, as well as certain luxury Genesis models, including the GV60, GV70, and G80 electrified variants, from the 2022-2025 model years, Reuters reported.
It looks like the issue stems from “the integrated charging control units in these vehicles, which may become damaged and fail to charge the 12-volt battery. This malfunction could lead to a complete loss of drive power, posing safety risks for drivers,” the NHTSA stated.
If you’re an owner of one of these Hyundai models dating 2022-2025, stay tuned. Hyundai has not yet provided a timeline as to when affected vehicles will be repaired.
To make that happen, the company’s dealers will inspect and replace the charging unit and its fuse if necessary, NHTSA said. Free of charge, of course.
Importantly, no crashes, injuries, fatalities, or fires due to this issue have been reported in the US, Hyundai reported.
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