Tesla Inc reported stronger-than-expected quarterly profit on Wednesday as a series of price increases on its best-selling electric vehicles helped offset production issues caused by COVID-19 lockdowns in China.
The company promised a “record second half” for the year and reiterated its target of 50% average annual growth in vehicle deliveries over a multi-year horizon, but did not give specific targets for 2022 deliveries. in the results documents.
In a conference call, Chief Executive Elon Musk said the company doesn’t have a demand problem, dismissing the idea that global economic issues are having an effect on interest in Teslas.
Tesla shares rose about 1% in after-hours trading. The shares are down about 40% since their peak in November.
Tesla’s Chinese factory ended the second quarter with a record monthly production level, and the company said production continued to grow in Texas and its new German factory saw a big improvement in the production rate towards the end. of the quarter.
Yet Tesla did not give a detailed production outlook for its factories in Berlin and Texas, which Musk said were losing billions of dollars.
“We are prepared for some near-term margin headwinds due to (new) challenges from the ramp-up of new production, particularly in Berlin,” Morgan Stanley said in a statement after the release. announcement of the results.
The electric vehicle maker posted adjusted earnings of $2.27 per share against consensus analyst estimates of $1.81.
Its automotive gross margin fell to 27.9%, down from both a year earlier and the previous quarter, amid inflationary pressure.
The company has raised the prices of its cars several times this year to cope with higher costs for lithium used in batteries and aluminum used for bodywork, as well as other raw materials.
Musk, however, said Tesla would lower prices when inflation cools.
“Tesla’s strong quarter is the latest sign that it has done a remarkable job navigating through global supply chain and logistics challenges, weathering the storm better than most traditional automakers.” , said Jesse Cohen, senior analyst at Investing.com.
“Tesla’s improved manufacturing efficiency positions it well to produce more cars, putting it on track to exceed its shipments target for the year,” he said.
Tesla said it converted about 75% of its bitcoin purchases into fiat currency, adding $936 million in cash to its balance sheet. Musk, at the start of a conference call with analysts, said the sale was made to boost liquidity as Tesla was unsure how long China’s COVID-19 lockdown would last. Tesla has not sold any of its Dogecoin cryptocurrency holdings, it added.
“It’s unclear exactly how much the group lost from selling crypto, but with 75% of its holdings now converted to more stable currency, most of the damage has been acknowledged,” said Hargreaves analyst Laura Hoy. Lansdown.
“However, Bitcoin’s losses underscore an important part of Tesla’s investment case – its eccentric owner. While Musk’s impressive innovation has served the company well, his personal flair is beginning to raise governance questions,” she added.
Total revenue fell to $16.93 billion in the second quarter from $18.76 billion a quarter earlier, ending its record revenue streak in recent quarters when it had struggled to meet demand for its electric cars due to the closure of its Shanghai plant and production issues at new plants.
Analysts had expected revenue of $17.10 billion, according to IBES data from Refinitiv.
Tesla is bracing for a potential recession and growing competition from rivals. It also faces the challenges of significantly ramping up production in the second half, after lockdowns in China hit production at the company and its suppliers.
Musk previously said Tesla’s new factories in Texas and Berlin were struggling to ramp up production, calling them “gigantic money furnaces” that were losing billions of dollars.
Musk said he had “a very bad feeling about the economy” in June and began laying off staff.