Tesla Posts First Full Year of Profitability

Chief Executive

Elon Musk

last year suggested a delivery target of about 840,000 to one million vehicles in 2021. Wall Street’s projection is for about 796,000 vehicles.

For 2020, Tesla reported a profit of $721 million on about $31.5 billion in sales, which compares with an $862 million loss and sales of $24.6 billion in 2019. The company topped Wall Street’s revenue expectation of about $31.1 billion, according to FactSet, though missed profit estimates.

Tesla said its bottom line in the latest quarter was weighed down by a range of factors, including supply-chain costs and preparations to introduce updated versions of its Model S luxury sedan and Model X sport-utility vehicle.

Shares in the car maker slumped more than 6% in after-hours trading.

Tesla delivered quarterly profits during the pandemic despite the temporary shutdown of the company’s lone U.S. car plant because of the health crisis. To manage the impact, Chief Executive Elon Musk battled with local authorities to reopen the factory, temporarily reduced salaries, furloughed workers and sought rent breaks. Later in the year, he tested positive for Covid-19.

The 17-year-old company’s performance, coupled with wider investor enthusiasm about electric vehicles, sent the stock soaring more than 700% last year and turned Tesla into the world’s most valuable auto maker. The string of quarterly profits also allowed it to secure a spot in the S&P 500 index.

Tesla generated a profit of $270 million in the fourth quarter, up from $105 million during the year-earlier period. Sales for the October through December period rose around 46% from the final three months of 2019 to roughly $10.7 billion.

Tesla’s financial results have been buoyed by the sale of regulatory credits to rival auto makers that need them to comply with emissions-related rules. Such credits brought in roughly $1.6 billion last year, up from $594 million in 2019.

Tesla has benefited from growing electric-vehicle demand in China, where the company began delivering locally made vehicles in 2019. The company has expanded production capacity at its Shanghai facility and this month delivered its first made-in-China Model Y sport-utility vehicles.

But Tesla also faces increased competition from incumbent auto makers such as

General Motors Co.

and

Ford Motor Co.

and a fleet of startups that are developing their own plug-in models, including in China.

To support its growth, the company aims to open two new vehicle factories this year, one near Austin, Texas, and the other near Berlin, its first in Europe. Tesla also plans to introduce a pickup truck and semitrailer truck.

Tesla’s ascendancy from plucky startup to the world’s most-valuable auto maker has been rocky at times. The company has often struggled to introduce new vehicles, such as the Model 3 compact car, and grappled with production challenges that have strained its finances.

Tesla also hasn’t delivered on some of Mr. Musk’s more grandiose promises, such as launching a robot taxi service by the end of 2020.

More recently, federal regulators this month asked Tesla to recall roughly 158,000 vehicles over touch-screen failures that can affect safety functions, including backup cameras. Tesla hasn’t responded to a request for comment about whether it intends to follow through with the recall, which would be one of its largest safety actions to date.

Tesla has shored up its cash position recently by selling billions in new stock. Mr. Musk has said the company would use the funds to pay down debt and amass what he described as a war chest.

Write to Rebecca Elliott at rebecca.elliott@wsj.com