Auto Gross Margin Upside Driven By “Volume Leverage, Lower Raws, Freight, Duties, And FSD”

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Tesla has pleasantly shocked investors after a fairly long period of underperformance, and the ensuing elation is clearly visible in the market today as the EV giant’s shares notch a gain of 16 percent, which corresponds to one of their best performances ever. Now, Wall Street is out with a few critical insights into Tesla’s stellar earnings report.

BofA raises TSLA price target from $255 to $265
Goldman raises TSLA price target from $230 to $250 pic.twitter.com/JHE8L0avFG

— zerohedge (@zerohedge) October 24, 2024

As we reported on Wednesday, Tesla’s auto gross margin (ex-Regulatory Credits) printed at 17.05 percent for the just-concluded quarter against expectations of 14.90 percent. According to the Bank of America (BofA), this upside was primarily driven by “volume leverage, lower raws, freight, duties, and FSD.”

Basically, Tesla was able to leverage its apex position within the EV industry to negotiate better terms with raw material suppliers. On a granular level, the EV giant’s margin received a sizable boost from its lithium procurement efforts, where it was able to drive a particularly hard bargain. However, Oppenheimer believes that this tailwind will offer “diminishing returns once lithium prices stabilize.”

Of course, Tesla’s FSD-related deferred revenue recognition offered the…