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Tesla made a profit of $1.6 billion in the third quarter of 2021. It built 237,823 cars and delivered 241,391 cars in the process, ending Q3 with $1.3 billion in free cash flow and $16 billion in cash and cash equivalents. Impressively, these record results happened despite supply chain woes like clogged ports and the semiconductor shortage.
In its presentation to investors, Tesla said that record production together with internal cost reductions have more than offset a small drop in the average selling price of its cars. It now has an operating margin of 14.6 percent, beating its earlier guidance.
The Models 3 and Y did almost all the heavy lifting. Tesla built 228,882 of these battery electric vehicles and delivered 232,102 of them. The Models S and X numbers were much increased compared to Q2 2021, with 8,941 built and 9,289 delivered, but this time last year it was selling nearly twice as many.
Tesla’s solar and storage businesses are chugging along, deploying nearly as much solar (83 GW) and slightly more battery storage (1,295 MWh) in Q3 than Q2 of this year.
Cheaper, longer-life battery packs
Perhaps the most interesting piece of information in the investor presentation was the news that Tesla is switching battery chemistry for all standard-range Models 3 and Y. Until now, most Teslas have used batteries with a nickel cobalt aluminum (NCA) chemistry. But recently it started offering an alternative using an older technology that uses a lithium iron phosphate (LFP) chemistry. (Most other BEVs use a nickel manganese cobalt chemistry.)
LFP cells are cheaper than NCA or NMC cells and have much longer useful lifetimes, with the trade-off being a lower energy density. However, that might not actually be a downside—although each individual cell holds less energy, LFPs’ much less volatile nature means no need to worry about thermal runaway in the event of a crash. And that in turn means an LFP battery pack needs to waste much less volume on cooling and structural protection to keep the cells separated, meaning that energy density at the pack level should compensate. (On the downside, LFP cells don’t fare as well when it gets very cold.)
Until now, intellectual property restrictions have kept LFP cells mostly within China. But export restrictions are set to ease next year, and Tesla won approval from the Chinese government to start using LFP batteries in Chinese-made BEVs in 2020. Last month it started asking US customers if they’d accept standard-range cars with LFP packs instead of NCA; now it’s making that switch mandatory for all regions.
Tesla hasn’t said which company will supply it with LFP cells, but it has existing contracts with CATL, a major source of LFP cells in China.
