Continue reading this on our app for a better experience

Open in App
Floating Button
Home Capital Electric vehicles

Tesla notches record profit, sees big 2022 production gain

Bloomberg
Bloomberg • 4 min read
Tesla notches record profit, sees big 2022 production gain
“We may pull a rabbit out of the hat. Q3 and Q4 will be substantially higher." / Photo: Bloomberg
Font Resizer
Share to Whatsapp
Share to Facebook
Share to LinkedIn
Scroll to top
Follow us on Facebook and join our Telegram channel for the latest updates.

Tesla Inc reported better-than-expected first-quarter results, buoyed by strong demand for its electric vehicles, with Elon Musk predicting output will grow at a fast clip for the rest of the year despite supply-chain challenges.

The first major US automaker to report financial results for the first three months, Tesla easily beat estimates with a record profit. It cautioned that production remains constrained by shortages and higher prices for key components, a common refrain for automakers due to global bottlenecks on supplies of parts such as semiconductors.

But Chief Executive Officer Musk said Tesla should be able to make up for any production shortfalls in the first half of the year from coronavirus-related shutdowns at its factory in Shanghai, and is on track to expand production to more than 1.5 million vehicles this year. It delivered about 936,000 cars in 2021.

“We may pull a rabbit out of the hat,” Musk said on a conference call Wednesday. “Q3 and Q4 will be substantially higher.”

The Austin, Texas-based company posted strong gains in profit and revenue for the first three months, including the sale of regulatory credits totalling US$679 million -- more than double the previous quarter. Tesla has generated billions through sales of zero-carbon credits that allow other automakers to comply with stricter emissions regulations. But Chief Financial Officer Zach Kirkhorn said that credit gain was mostly due to a one-time US$288 million benefit linked to stiffer US emissions penalties.

“Credit revenue would have declined compared to the period last year” without that extraordinary boost, the CFO told analysts.

See also: Tesla flags 'notably lower' growth as it builds low-cost car

Tesla has repeatedly said it expects credit revenue to shrink over time as more automakers launch EVs to meet the growing demand for battery-powered vehicles. Yet rival automakers remain far behind Tesla, even as the Biden administration has moved to hasten that shift through tougher fuel economy standards.

“It speaks to where the rest of the auto industry is when it comes to selling EVs in high volumes,” said Gene Munster, managing partner of Loup Ventures. “They are still behind” Tesla, he said.

Shares of Tesla rose as much as 7.1% to US$1,046.99 in after-market trading. They fell 5% to US$977.20 at the close in New York.

See also: BYD posts record sales quarter to challenge Tesla at own EV game

While Tesla is still by far the world’s most-valuable auto company, with a market capitalization of US$1.01 trillion, the shares have declined 7.5% this year amid concerns about global shortages of key parts. But the company has fared better than bigger-volume rivals, such as General Motors Co. and Ford Motor Co., whose shares are down 29% and 23% respectively.

Quarterly Profit
Profit at Musk’s electric-vehicle and clean-energy company totalled US$3.22 a share, excluding some items, the automaker said Wednesday. That beat the US$2.27 average of analysts’ estimates. Revenue rose to US$18.8 billion, compared with estimates of US$17.9 billion.

Increased sales of higher-margin vehicles and cost cuts helped Tesla improve its automotive gross margin to 32.9%. Dan Levy, a Credit Suisse analyst with an “outperform” rating on the stock, said Tesla’s higher margins were a “positive surprise” that bodes well for its ability to keep costs in check and drive sales.

“The cost improvement is critical, as we believe Tesla will ultimately use cost improvements to fund lower-priced vehicles,” he wrote in a research note.

That has padded a war chest totalling US$18 billion in cash and cash equivalents as of the end of the quarter. It also continues to chip away at its debt load, with Tesla carrying less than US$100 million in debt at the end of the quarter, excluding financing for its vehicle and energy products.

The global EV market leader is expanding on three continents, with new factories in Austin and Berlin alongside existing plants in California and Shanghai. That is expected to help it meet -- or exceed -- its stated goal of 50% annual growth.

No Bombshells
Musk refrained from dropping any bombshells on the call and was not asked about how he plans to finance his US$43 billion bid for Twitter Inc., a subject of much speculation since making an unsolicited offer for the social media company.

Tesla has long talked about customers having the ability to turn their cars into a fleet of driverless vehicles, but the company is now working on a new model -- with no steering wheel or pedals -- that will be a dedicated robotaxi. Musk vowed to unveil the car in the next two years and achieve “volume production” of it in 2024.

Highlights

Re test Testing QA Spotlight
1000th issue

Re test Testing QA Spotlight

Get the latest news updates in your mailbox
Never miss out on important financial news and get daily updates today
×
The Edge Singapore
Download The Edge Singapore App
Google playApple store play
Keep updated
Follow our social media
© 2024 The Edge Publishing Pte Ltd. All rights reserved.