Tesla reports record profit, but warns of lingering supply chain issues

By Chris Isidore, CNN Business

Tesla overcame supply chain issues to more than triple its profit from a year earlier, easily beating Wall Street expectations for the quarter.

The company posted adjusted profit of $2.9 billion, up sharply from $903 million a year earlier and well above the $2.6 billion forecast by analysts polled by Refinitiv. Revenue of $17.7 billion was up 65% from the prior year.

The results brought annual profit to $7.6 billion and revenue to $53.8 billion.

CEO Elon Musk returned to the conference call with investors after missing the call three months ago. Six months ago he said he would no longer take calls unless there was “something important” he needed to say.

The news he gave to investors is that Tesla is suspending plans for new vehicles due to supply chain issues the company is facing. “We will not be introducing new vehicle models this year. It wouldn’t make sense. We will still be limited in parts,” Musk said on the call. “We will be ready to put them into production, hopefully next year.”

Tesla had talked about many vehicles in its product portfolio, including the Cybertruck pickup, a tractor-trailer, a Roadster model, or a $25,000 car that would be cheaper than any of its current models.

Bringing a new product to market in 2021 “would have required a lot of attention and resources,” Musk said. “It’s the same this year.”

He added that the company faced “multiple supply chain challenges”, but did not provide any details. “The chip shortage, although better than last year, remains a problem,” he said.

In its statement, the company warned that over the past quarter it has seen a continuation of global supply chain, transportation, labor and other manufacturing issues, which, in its view, limited its ability to operate factories at full capacity.

Parts supply issues, particularly computer chips, have been a concern for the entire automotive industry for more than a year. Tesla has managed to continue to increase production and sales in the face of these shortages. Its traditional automaker rivals, on the other hand, have been forced to temporarily close their factories and limit production. This has led to tight new vehicle inventories across the industry and record prices for car buyers.

By contrast, Tesla was able to take advantage of the growing appetite for electric vehicles among car buyers. Global electric vehicle sales are estimated to have risen to 4.5 million last year from 2.1 million in 2020, according to automotive research firm LMC. Telsa’s sales for 2021 were 936,000, nearly double the 500,000 vehicles sold in 2020.

“With the chip shortage remaining a major overhead on the automotive space and logistical issues globally, this impressive earnings beat speaks to an EV demand trajectory that looks quite robust for Tesla going forward. approaching 2022,” said Dan Ives, technology analyst for Wedbush Securities.

Tesla said it plans to increase production at its existing factories in California and Shanghai, while ramping up production at new factories outside Austin, Texas and Berlin.

“We believe there is scope to expand the overall capacity [in its Fremont, California plant] over 600,000 a year,” the company. “We believe competitiveness in the electric vehicle market will be determined by the ability to add capacity through the supply chain and ramp production,” he said.

It said it began manufacturing its Model Y SUV, its newest vehicle, at its Austin plant late last year.

“After final certification of the Austin-built Model Y, we plan to begin deliveries to customers,” he said. As for its Berlin plant, the company said it was finalizing manufacturing permits from local authorities.

The demand is clearly there for Tesla’s cars, assuming the company can increase supply. It said its vehicle supply fell to an average of 4 days of inventory in the quarter, from 11 days a year earlier and an average of 28 days in 2017. Even in an industry facing record supply of new vehicles, i.e. an exceptionally low supply.

Tesla’s tax return didn’t provide any details on when its Cybertruck pickup would be available, other than to say it will be built in Austin “after the Model Y.” The company is scheduled to hold a conference call with investors later Wednesday evening.

Tesla shares, which had fallen 11.3% so far in 2022 through Wednesday’s close, rose in post-trade trading at the start of its investor call, after initially falling after the report on the results.

Even so, Tesla shares are worth more than the market value of the world’s 10 largest automakers, despite being a smaller company than any of them.

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