Tesla profits roar ahead
Elon Musk’s company beats Wall Street’s expectations
Tesla overcame severe supply chain problems in the latest quarter, boosting its profit margins and pushing its revenue above Wall Street expectations. Elon Musk, whose relationship with Wall Street has often become frayed during the company’s frequent bouts of growing pains, used the upbeat moment to disclose that he would no longer take part in most Tesla earnings calls.
The chief executive’s combative defence of the US electric carmaker and often extravagant predictions have made the calls a favourite with individual investors, providing the most regular insight into his thinking.
Shares in Tesla edged up 1 per cent in after-market trading as it reported it had made headway in meeting its profitability targets despite serious challenges that threatened to limit production. Revenue reached just less than US$12 billion ($17b), higher than the $11.2bn most analysts had expected and up 97 per cent from a year before, when a forced factory closure caused by the pandemic held back its business.
The company’s all-important gross profit margin from automotive operations reached 28.4 per cent, nearly two percentage points higher than the first three months of 2021. The advance came even though its income from selling regulatory credits, at $354 million, was down from $514m in the preceding quarter.
Musk spent most of his final regular earnings call with investors and analysts complaining about the difficulty of achieving large-scale manufacturing. Commenting on what he said had been “hundreds” of start-ups in the car industry, he said: “The amazing part is Tesla didn’t go bankrupt in reaching large-scale production, because everyone else did”.
Tesla had already announced robust new vehicle deliveries for the second quarter despite supply chain problems and setbacks in China. Yesterday it said deliveries reached 201,304, above its earlier estimate and the 195,000-200,000 most analysts had predicted. Operating profits tripled from a year before, to $1.3bn, as Tesla benefited from higher sales volumes and reined in its operating costs. The advance came despite a $176m charge to reflect what the company said was a likely payout under Musk’s stock compensation plan, reflecting the likelihood the company will hit a new performance target.
Tesla had lifted its core automotive profit margin by 10 percentage points over the past two years, even as its average selling prices had fallen by 10 per cent, said Zach Kirkhorn, chief financial officer.
The latest figures include an impairment charge of $23m on Tesla’s bitcoin holdings, reflecting the dip in cryptocurrency prices at the end of the second quarter. The company does not revalue its bitcoin holdings upwards when the price rises, meaning its profit and loss account will not reflect the cryptocurrency’s recent strong rally unless it actually liquidates some of its holdings.
Net income rose to $1.14bn, or $1.02 a share, from $140m, or 10 cents a share, the year before. Based on the pro forma numbers Wall Street judges the company on, which strip out stock-based pay, Tesla’s earnings per share reached $1.45, compared to analysts’ forecasts of 96 cents.