Tesla profit tops goal; Musk sees no demand problem

A Tesla logo was seen in Los Angeles, California USA on January 12, 2018. REUTERS / Lucy Nicholson

July 20 (Reuters) – Tesla Inc (TSLA.O) reported a smaller-than-expected drop in quarterly earnings on Wednesday as a series of price increases on electric vehicles (EVs) helped offset manufacturing challenges caused by COVID-19 shutdowns in China.

CFO Zachary Kirkhorn said Tesla is still pushing to reach 50% growth in deliveries this year, adding that although the target had become more difficult, “strong execution is still possible.”

CEO Elon Musk said he expects inflation to start declining by the end of 2022 and that most commodity prices will stabilize.

Tesla does not have a demand problem, but a production problem, Musk said at a conference call. He dismissed the idea that global economic problems hurt interest in Tesla, despite rising vehicle prices to what he called “embarrassing levels.”

The US price of the long-range Tesla Model Y version, now $ 65,990, has risen more than 30% since the start of 2021.

Shares of Tesla rose around 1% in trading after working hours. The shares are down around 40% from the top in November.

Tesla’s China plant ended the second quarter with a record high monthly production level. Musk said that new factories in Berlin and Texas aimed 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 had previously said that the new factories were “giant money kilns” and that he had “a super bad feeling about the economy”. read more

Morgan Stanley analysts said in a report following Tesla’s earnings announcement that they see “headwinds in the short term due to (new) challenges with increasing new production, especially in Berlin”.

Tesla executives acknowledged a certain persistent tightness in supplies of older-generation microchips, but said there were no major problems with supplies of chips and batteries that blocked unforeseen COVID-related shutdowns.

The electric carmaker posted an adjusted earnings of $ 2.27 per share for the quarter against analysts’ consensus estimates of $ 1.81. This was down from $ 3.22 in the previous quarter.

The gross margin for the automotive industry fell to 27.9%, down from the previous year and the quarter before, in the midst of inflationary pressures.

Tesla’s total revenue fell to $ 16.93 billion in the second quarter from $ 18.76 billion a quarter earlier, ending the series with record revenues in recent quarters.

Analysts expected revenue of $ 17.10 billion, according to IBES data from Refinitiv. read more

BITCOIN FOR CASH

Tesla said it had converted about 75% of its bitcoin purchases into fiat currency, adding $ 936 million in cash to the balance sheet.

Musk said the sale was made to increase liquidity as Tesla was unsure how long the covid barrier in China would continue. Tesla has not sold any of its holdings of the Dogecoin cryptocurrency.

“This should not be taken as a judgment on bitcoin,” he said, adding that Tesla was open to increasing its cryptocurrency holdings in the future.

Musk said in May last year that Tesla would not sell its bitcoin.

“Bitcoin losses point to an important part of the Tesla investment case – its eccentric owner. While Musk’s impressive innovation has served the company well, his personal flair is beginning to raise questions of governance,” said Laura Hoy, an analyst at Hargreaves Lansdown.

Reporting of Hyunjoo Jin in San Francisco and Nivedita Balu in Bengaluru; Edited by Anil D’Silva, Peter Henderson, Matthew Lewis, Leslie Adler and Himani Sarkar

Our standards: Thomson Reuters Trust Principles.