Analysis shows that although Toyota sold more than seven times as much as Tesla in the third quarter, Tesla made eight times more profit per vehicle than Toyota, which helped Tesla. It leads Toyota in quarterly net profit for the first time since going public in 2010.
Tesla focuses on premium models like the Model Y
Tesla reported a third-quarter net profit of $3.29 billion. By comparison, Toyota’s third-quarter net profit was 434.2 billion yen. Calculated at an average exchange rate of 138:1 between the yen and the U.S. dollar in the third quarter, Toyota’s third-quarter net profit was about $3.15 billion.
Tesla has become one of the most profitable automakers in the world, even as Toyota’s profits have slumped due to some idiosyncratic factors, including rising raw material costs. Although its net profit in the third quarter was lower than that of Mercedes-Benz, it surpassed both BMW and Volkswagen. Tesla’s net profit margin for the quarter was 15%.
Tesla’s high profits are largely driven by the profitability of individual vehicles. Toyota sold 2.62 million vehicles in the third quarter, 7.6 times more than Tesla’s 344,000. But Toyota’s net profit per vehicle is about $1,200, one-eighth of Tesla’s $9,570. Tesla’s net profit on individual vehicle sales is considered industry-leading, even ahead of the likes of Mercedes-Benz. Tesla’s profit per vehicle has grown particularly rapidly since the second quarter of 2021. Investors responded positively. As of Monday, Tesla’s market value was about $622.3 billion, about three times that of Toyota.
Toyota bZ4X Electric Vehicle
The gap is the result of fundamentally different strategies pursued by the two automakers. Toyota offers a wide variety of vehicles, from gasoline-powered to hybrid, electric and fuel cell vehicles, in sizes and prices. By contrast, Tesla is solely focused on electric vehicles. Sales of the Model Y and Model 3, which account for more than 90% of its total sales, have nearly doubled in two years despite relatively high prices. Even the cheaper Model 3 starts around $40,000 in the US.
At the same time, Tesla, confident in its strong brand appeal, did not hesitate to raise prices to pass on higher raw material costs to consumers. The company also started offering its lucrative self-driving software to consumers as an add-on option before its rivals. “The biggest factor behind Tesla’s profit growth is sales volume, followed by price hikes and increased sales of self-driving software,” said Koji Endo, an auto industry analyst at SBI Securities in Tokyo.
