Tesla Wins as $1 Billion First Quarter Adds Profit Momentum

(Bloomberg) — Tesla Inc. reported better-than-expected revenues as record electric vehicle sales expanded margins and propelled the company to a first quarter of $1 billion in net income in its 18-year history.

Earnings have more than tripled to $1.45 a share on an adjusted basis, surpassing the 97 cent average of analysts’ estimates and marking the eighth quarter in a row. Tesla shares rose a whopping 2.6% before the start of regular trading Tuesday.

Rising sales of Model Y crossovers and Model 3 sedans caused operating profits to quadruple, even as Tesla struggled with chip shortages and port congestion and struggled through a costly influx of new Model S and X vehicles. The company widened its margins from its main auto business to 25.8%, from 22% in the previous quarter and 18.7% a year earlier.

“It puts them on the path to being the best auto company in its class from a margin perspective,” said Ben Kallo, a Robert W. Baird analyst. “I don’t think anyone expected such a big success.”

Tesla’s gross margin for cars, excluding sales with regulatory credits, is up nearly 10 percentage points to the highest since the company introduced the Model 3, Chief Financial Officer Zachary Kirkhorn said during a conference call with analysts. That was possible because Tesla has cut the cost of making cars more than it has cut prices, he said.

While Tesla is still by far the world’s largest automaker by market value, its shares are down nearly 7% this year, even as the S&P 500 has hit new highs. More established colleagues, including General Motors Co. and Ford Motor Co., have rallied as they have plans to enter the emerging EV market more aggressively.

Chip Dear

Increased competition from rival EVs comes with supply chain challenges due to a global semiconductor shortage and higher raw material prices. Chief Executive Officer Elon Musk said Tesla has had plant closures due to parts shortages, but was able to source replacement suppliers for some semiconductors. He warned that the chip shortage could hamper Tesla’s plans to increase production.

“The global chip shortage remains quite severe,” Musk said during the call. “It looks like it’s getting better, but it’s hard to predict.”

Tesla’s second-quarter revenue nearly doubled to $11.96 billion in the last quarter, beating analysts’ estimates of $11.36 billion. Revenue from the sale of regulatory credits — used by other automakers to offset greenhouse gas emissions — was $354 million, down from $518 million in the first three months of the year.

Musk, who said he spoke from the site of Tesla’s new factory under construction in Austin, Texas, dropped analysts a bit of a bombshell: In the future, he will no longer participate in all of the company’s quarterly earnings calls.

“Of course I will be holding the annual shareholders’ meeting, but I think I will most likely not participate in the earnings talks going forward unless there is something very important I have to say,” he said.

The company confirmed a forecast of 50% annual growth in deliveries over several years and reiterated that this could be one of the years where it expands by more than that. The automaker said it is on track to start production of its Model Y crossover at two new plants – one in Austin and the other in Germany – by the end of the year.

Tesla has pushed the launch date for its Semi-truck, which was first unveiled in 2017, to next year. Production of its highly anticipated Cybertruck pickup will follow the Model Y in Austin, but Tesla did not provide further details.

“I don’t think anyone is surprised that the Semi has been delayed and that the focus is on Model Y and Cybertruck,” Loup Ventures analyst Gene Munster said in a phone interview.

Tesla generated $619 million in free cash flow, a big blow compared to the $319.1 million outflow forecast by analysts. That was helped by deliveries of 201,250 vehicles worldwide in the second quarter, compared to 90,891 a year ago.

Bitcoin loss

Tesla reported a $23 million Bitcoin-related impairment in the quarter, a rounding error compared to its digital assets totaling $1.31 billion as of June 30.

The company announced in early February that it had invested $1.5 billion in company cash to buy Bitcoin and said it would start accepting payments using the token, taking the cryptocurrency’s price to an all-time high and lending legitimacy to virtual reality. currencies. But Musk later suspended purchases of vehicles containing Bitcoin over concerns about its environmental impact, causing its value to plummet.

Tesla’s recent challenges in China and the plethora of US regulatory investigations into crashes involving Autopilot, its suite of driver assistance features, have cast shadows over its prospects. While Musk did not elaborate on the company’s operations in China – the world’s largest auto market – he said US regulators were not a “fundamental constraint” on deploying fully autonomous vehicles.

When asked about the take rate for Tesla’s Full Self-Driving feature, he acknowledged that it’s still not ready for wide release.

“We need to make fully self-driving work for it to be a compelling value proposition, otherwise people are betting a bit on the future,” Musk said. “Like now, does it make sense for someone to do an FSD subscription? It’s debatable. But once we have deployed FSD on a large scale, the value proposition will be clear and everyone will benefit from it.”

(Early stock trading updates in the second paragraph.)

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