Tesla Profit Exceeds Target; Musk sees no request problem

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 decline in quarterly profit on Wednesday as a series of price increases on its electric vehicles (EVs) helped offset production problems caused by the COVID-19 lockdowns in China.

Chief Financial Officer Zachary Kirkhorn said Tesla is still striving to achieve 50% growth in shipments this year, adding that while the goal has become more difficult, “it is still possible with strong execution.”

Chief executive Elon Musk said he expects inflation to start falling by the end of 2022 and most commodity prices to stabilize.

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Tesla doesn’t have a demand problem, but a production problem, Musk said on a conference call. He dismissed the idea that global economic problems were hurting interest in Tesla, despite vehicle prices rising to what he called “embarrassing levels”.

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

Tesla shares rose about 1% in after-hours trading. Shares are down about 40% from their November peak.

Tesla’s Chinese factory ended the second quarter with a record monthly production level. Musk said new factories in Berlin and Texas aim to produce 5,000 cars a week by the end of the year, adding that Berlin was producing 1,000 cars a week in June.

Musk previously said the new factories were “gigantic money-making furnaces” and that he had “a very bad feeling about the economy.” Read more

Morgan Stanley analysts said in a report after Tesla’s earnings announcement that they see “near-term margin headwinds due to (new) challenges from ramping up new production, especially in Berlin”.

Tesla executives acknowledged some lingering strain in older-generation chip supply, but said there were no major issues in chip and battery supply, barring unplanned shutdowns related to the COVID.

The electric-vehicle maker posted adjusted earnings of $2.27 per share for the quarter, down from consensus analyst estimates of $1.81. This is down from $3.22 in the prior quarter.

Its automotive gross margin fell to 27.9%, down from both a year earlier and the previous quarter, amid inflationary pressure.

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

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

SILVER BITCOIN

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

Musk said the sale was made to increase liquidity as 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 a verdict 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.

“The bitcoin losses underscore 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 beginning to raise governance questions,” said Laura Hoy, analyst at Hargreaves Lansdown.

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Reporting by Hyunjoo Jin in San Francisco and Nivedita Balu in Bangalore; 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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