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Monday, November 29, 2021

Tesla beats Wall Street’s expectations with record quarterly earnings

 

New York (CNN Business). Tesla reported a stronger-than-expected second quarter, with a record net income of $1.1 billion.

It was more than twice the amount it earned in the first quarter and more than 10x its net income from the year before. It also answered an essential criticism from investors who were bearish on Tesla’s stock because of its strong results.

Tesla did not rely on other automakers selling regulatory credits for its record-breaking earnings. These credits were responsible only for $354 million of the quarter’s revenue. Even though Tesla reported positive adjusted earnings in previous quarters, Tesla’s net income depended on the sale of credits to competitors that required them to comply with stricter environmental standards. Critics have long attacked Tesla for that, saying the company wasn’t making money through selling cars.

Adjusted income, which investors closely monitor, rose to $1.6 billion. This is far more than analysts had predicted at $1.1 billion. It was also up from its previous record earnings on that basis of $1.1 billion in the first quarter. Forecasts of $11.3B were also exceeded by revenue of $12 billion.

 

Low battery and chip supply

However, Elon Musk acknowledged that the company’s growth was impeded by the shortage of computer chips, affecting all other automakers and many other manufacturers.

He stated that while making cars at full speed, the global chip shortage situation is still dire. “For the remainder of this year, our growth rates will depend on the slowest part of our supply chain,” he said, adding that there are many chips that can serve as a brake to growth.

Musk and Tesla did offer conservative views on a few other products and plans that they had promised.

Tesla reiterated its earlier guidance, stating that it plans to construct factories in Austin, Texas, and Berlin and then began limited production of the Model Y SUV there later this year.

The problem is not limited to a shortage of chips. The cells required to produce the large batteries that each vehicle requires are also in short supply.

Tesla said Monday that it wouldn’t start producing its Cybertruck pick up until after the Model Y is up and running in Texas. It also delayed plans for a semi-tractor truck until 2022 “due to limited supply of battery cells” and challenges in global supply chains.

Musk stated that both Cybertruck and Semi are heavy users [of] battery capacity. We have to ensure that we have enough cell capacity to support these two vehicles. Next year, we expect a considerable increase in cell availability. He said, however, that the rise will not all be available by the beginning of 2022 but will “ramp up” over the course of the next year.

Cybertruck’s Challenges

Several established automakers, such as Ford (F) and General Motors(GM), are on the brink of selling their electric pickups. This puts pressure on Tesla to bring its first pickup onto the market. According to the company, it is expected “volume production” of Cybertrucks by 2022.

Musk acknowledges that the pickup’s unique design will pose a challenge for the launch.

It’s an entirely new architecture. It’s going to be a great product. He said that it might be “our best product ever.” But there are many fundamentally new design ideas. There’s so much territory yet to explore, so there will be challenges.

He tweeted that Tesla would open its supercharger network to other automakers in the coming year. Although he didn’t give details, 

He stated that Tesla plans to lower charging costs. He said that it was in line with Tesla’s overall mission of converting the world away from gasoline-powered cars to electric vehicles.

He stated that the goal of his organization was to promote sustainable energy. It is not to build a walled yard and then use it to bully our competitors. Some companies sometimes do this.

Musk believes that full-auto-driving subscriptions are going to generate significant revenue beginning next year. However, it is not clear if FSD subscriptions make financial sense right now. It’s a debatable issue.

Bitcoin holdings: Small loss

In February, Tesla disclosed it used some of its cash on hand to purchase $1.5 billion in bitcoin. In April, it revealed that it has sold some of those holdings and booked a net income of $101 million from its crypto trading. The bitcoin transactions made some investors nervous, especially since the cryptocurrency has lost more than a third of its value since then. According to Dan Ives (tech investor at Wedbush Securities), some had expected that the company would report a loss of $75 million on bitcoin trading during the quarter. It reported a loss of $23 million instead.

Ives stated that “While supply chain problems remain, it appears as though it is moderating heading into six to nine months.” According to Ives, the report should confirm that Tesla will sell 900,000 full-year vehicles. It is an increase from the 500,000 units it sold in 2020. It sold 386,000 cars in the first six months of the year, which is more than twice the number it sold last year.

Karl Brauer, an executive analyst at iSeeCars.com, stated that the automaker benefited from record-setting sales and lowered internal costs to offset rising material costs and a $23million bitcoin ‘impairment.

Tesla’s numbers beat estimates by a healthy margin to confirm that strong global demand continues for EVs, enough to more than offset Tesla’s near-term problems.

One of his last quarterly calls

Musk’s remarks were mild in comparison to his previous quarterly earnings calls in which he often got into fights with analysts and rants against safety precautions put in place to combat the Covid-19 epidemic, calling them “fascist.” Musk said Monday that he would not be joining the call again in the future.

He said, “If I’m interviewing and can’t do any other work,” “I have a limited amount of time in the day.”

Musk is also the CEO of SpaceX. He has a tunnel-digging business called The Boring Company.

  • “I will attend the annual shareholder meeting. But, I believe that from now on, I won’t be on earnings calls unless I have something essential to share.”
  • Tesla shares have been battered this year as earlier earnings reports, while strong, had fallen short of Wall Street hopes. Shares of Tesla (TSLA) initially were up slightly in after-hours trading following his call.

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