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Elon Musk Reveals How Tesla Plans to Boost Profits

By Danny Vena - Feb 1, 2021 at 1:00PM

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How the company plans to increase its bottom line might surprise you.

Tesla (TSLA -6.42%) was one of the undisputed winners of 2020, gaining a massive 743% for the year. That momentum has continued into 2021, with stock already up more than 12%. The company's enigmatic founder, Elon Musk, admits that shareholders are giving Tesla a lot of credit from future profits.

On this episode of Fool Live that aired on Dec. 2, 2020, "The Wrap" host Jason Hall and contributor Danny Vena discuss how Musk plans to get there.

Jason Hall: Danny Vena, you're trying to talk about EVs and share some Elon Musk knowledge with us.

Danny Vena: Well, since we're talking about smarter, happier, and richer. This is a case where I own Tesla stock. So this makes me smarter, happier, and richer.

Tesla has already been one of the undisputed winners in 2020. The last time I checked, the stock was up roughly 560 some-odd percent so far this year. There's been a lot of factors that played into that. The company announced ambitious production goals at the beginning of the year. They kept those goals even through the pandemic. There was a stock split that attracted a lot of Robinhood investors. The whole fear of missing out thing. As the stock ran up, people were jumping onboard because they were afraid they were going to miss out.

Most recently, Tesla had announced its fifth consecutive quarter of profitability. Of course, the word that the stock would be inducted into the S&P 500, which I understand now is all going to be done in one tranche and is going to happen on December the 21st. I think originally, they were talking about splitting it up and now they're going to do it all at once.

So of course, the biggest winner from Tesla's breathtaking run this year has been Elon Musk. Late last month, it was reported that he had overtaken Bill Gates to become the world's second richest person and he's worth about a $128 billion. That puts him right behind the Amazon CEO, Jeff Bezos, whose net worth is around $180 billion.

Now, Musk recently sent an email to his employees that was uncovered yesterday. Essentially what he said is that the company is going to start focusing on profits. He said in the email to his employees, "When looking at our actual profitability, it's very low at about 1% for the past year. Investors are giving us a lot of credit for future profits, but if, at any point, they conclude that's not going to happen, our stock will immediately get crushed like a soufflé under a sledge hammer!"

Then he went on to say how they could achieve more profitability. Saying that this was a game of pennies, "requiring thousands of good ideas to improve a part cost, factory processes, or simply the design. ... A great idea would be one that saves $5, but the vast majority of those ideas are going to save $0.50 here or $0.20 there."

So based on that email, it looks like Elon Musk is going to have a greater eye toward profitability for Tesla, and that bodes well for Tesla shareholders, of which I am one.

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