A Tesla logo is seen in Los Angeles, California, U.S. January 12, 2018. REUTERS/Lucy Nicholson
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July 20 (Reuters) – Tesla Inc ( TSLA.O ) reported a smaller-than-expected drop in quarterly profit on Wednesday as a series of price increases for its electric vehicles (EVs) helped offset production challenges caused by lockdown of COVID-19 through China.
Chief Financial Officer Zachary Kirkhorn said Tesla is still aiming for 50% growth in deliveries this year, adding that while the target has become more difficult, it “remains possible with strong execution.”
Chief Executive Elon Musk said he expects inflation to begin to decline by the end of 2022 and prices for most commodities to stabilize.
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Tesla doesn’t have a demand problem, it has a production problem, Musk said on a conference call. He dismissed the idea that global economic problems were hurting interest in Tesla, despite car prices rising to what he called “disturbing levels.”
The US price of the long-range version of the Tesla Model Y, now $65,990, has risen more than 30% since the start of 2021.
Tesla shares were up about 1% in after-hours trading. The stock is down about 40% from its peak in November.
Tesla’s factory in China ended the second quarter with a record monthly production level. Musk said the new factories in Berlin and Texas aim to produce 5,000 cars a week by the end of the year, adding that Berlin produced 1,000 cars a week in June.
Musk previously said the new factories were “giant money ovens” and that he had a “super bad feeling about the economy.” Read more
Morgan Stanley analysts said in a report after Tesla’s earnings announcement that they see “short-term margin headwinds due to (new) challenges with ramping up new production, particularly in Berlin.”
Tesla executives acknowledged some ongoing constraints in the supply of older-generation microchips, but said there were no major problems in chip and battery supplies, barring unforeseen shutdowns related to COVID.
The electric vehicle maker posted adjusted earnings of $2.27 per share for the quarter, compared to analysts’ consensus estimates of $1.81. That’s down from $3.22 in the previous quarter.
Its auto gross margin fell to 27.9%, down from a year earlier and the previous quarter, amid inflationary pressures.
Tesla’s total revenue fell to $16.93 billion in the second quarter from $18.76 billion a quarter earlier, ending a streak of record earnings in recent quarters.
Analysts had expected revenue of $17.10 billion, according to IBES data from Refinitiv. Read more
BITCOIN TO MONEY
Tesla said it converted roughly 75% of its bitcoin purchases into fiat currency, which added $936 million in cash to its balance sheet.
Musk said the sale was made to increase liquidity when Tesla was unsure how long China’s COVID lockdown would last. Tesla has not sold any of its Dogecoin cryptocurrency holdings.
“This shouldn’t be taken as some kind of verdict on bitcoin,” he said, adding that Tesla is open to increasing its cryptocurrency holdings in the future.
Musk said last May that Tesla would not sell its bitcoins.
“Bitcoin losses point to 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 starting to raise questions about governance,” said Laura Hoy, an analyst at Hargreaves Lansdown.
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Reporting by Hyunjoo Jin in San Francisco and Nivedita Balu in Bengaluru; Editing by Anil D’Silva, Peter Henderson, Matthew Lewis, Leslie Adler and Himani Sarkar
Our standards: The Thomson Reuters Trust Principles.
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