Tesla profits jump despite production turmoil and China shutdowns

Tesla profits jump despite production turmoil and China shutdowns

Tesla weathered production disruptions in China and the high costs of scaling up new factories in Texas and Germany to report a 57% rise in adjusted earnings per share in its latest quarter.

The electric carmaker’s second-quarter results provided some relief after the company warned of production and supply strains. Revenue, at $16.9 billion, was up 42% from a year earlier, although the figure was slightly below the $17.1 billion that Wall Street expected.

Tesla also revealed that it had largely unwound last year’s controversial $1.5 billion bitcoin bet as it converted three-quarters of its stake into fiat currencies in the face of falling prices. of cryptography.

Chief Executive Elon Musk’s enthusiasm for cryptocurrencies made the automaker one of the first companies to put some of its cash into digital assets.

Musk warned in an internal email last month that he had a “super bad feeling” about the economy.

Asked about weakening demand on Wednesday, the Tesla boss said “a bit, maybe,” but added, “We have so much excess demand that it’s not a problem for us.” Chief Financial Officer Zach Kirkhorn said any drop in demand was “not significant”.

Instead, Musk said “Tesla’s problem is basically one of production.”

Supply chain pressures and Covid 19-related shutdowns in Shanghai forced the company to deliver around 935,000 vehicles in the second half to reach the 1.5 million total hoped for by many analysts, an increase of 70% compared to the same period of 2021.

Musk didn’t give a production forecast for the rest of the year, except to say the company was likely to hit “record” production. He also said Tesla’s plans are for it to reach full production by the end of the year, at an annualized rate of 2 million vehicles.

Tesla had revealed that production shutdowns in Shanghai and parts shortages wiped out up to a quarter of its vehicle deliveries in the three months to June 30. it was the first consecutive quarterly decline in more than two years.

Spending on new production facilities pushed Tesla’s closely watched gross profit margin from the automotive business to 27.9%, down from the record 32.9% margin reported in the first quarter.

Musk said Tesla’s crypto sales “shouldn’t be taken as a verdict on bitcoin” and were done to maximize the company’s cash position amid uncertainty over coronavirus-related shutdowns. Covid in China. Tesla was “certainly open to increasing bitcoin holdings in the future” and had not sold any of its dogecoins, he added.

Bitcoin’s price has fallen by about half since late last year, when Tesla valued its stake at just under $2 billion. He said the latest sales raised $936 million and he took a $106 million impairment charge on top of a $101 million charge taken last year.

Prior to the earnings release, Tesla’s share price had fallen 36% since Musk first revealed he had acquired a large stake in Twitter. Twitter’s stake raised concerns about whether its involvement in the social media company would lead to the sale of part of its Tesla stake. The tech-heavy Nasdaq Composite fell 13% over the same period.

Tesla shares initially jumped more than 4% after Wednesday’s results, but reduced their lead to 0.5%.

For the second quarter, Tesla reported adjusted earnings per share of $2.27, compared to $1.45 a year earlier. Under formal accounting principles, earnings per share climbed to $1.95 from $1.02 previously.

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