Skip to content
Subscriber Only
Opinion
Liam Denning

Tesla Needs Even More Than Ludicrous Speed

High costs help explain why record deliveries don’t translate into profits.

At least this Tesla achieved escape velocity. 

At least this Tesla achieved escape velocity. 

Photographer: Handout/Getty Images North America

Tesla Inc. refers to its most head-snapping level of acceleration as “ludicrous” mode. What the company needs, though, is escape velocity.

And what it needs to escape are its operating costs. The company didn’t manage to turn a profit despite record vehicle deliveries in its last quarter. As cheaper Model 3s account for a bigger proportion of sales, bringing down average selling prices, so Tesla needs to bring costs down faster to compensate. Comparing the gross margin on its core automotive business with the various expenses Tesla needs to absorb shows what it is up against.