The Tesla share price has gained 4.25% in after hours trading after the world’s leading manufacturer of all-electric cars announced year-on-year quarterly sales growth of 81% that delivered a record net income profit of $3.32 billion. That represents impressive growth on net income of $438 million generated over the same three months last year and came from revenues of $18.76 billion. Over the three months to March last year Tesla generated $10.39 billion.
The results comfortably exceeded analysts’ expectations for revenues of $17.8 billion. Tesla’s chief executive and co-founder Elon Musk also told shareholders that the company, now worth over $1 trillion has a “reasonable shot” at increasing production by 60% this year to 1.5 million cars. Last year the company manufactured 930,422.
However, despite Musk confidently telling investors “we’re growing very rapidly year over year” there was also a caution the company is not immune to the supply chain issues dogging all car makers. That will result, Tesla warned, in its factories not being able to run at full capacity for the remainder of the year. Component shortages and a resurgence of Covid-19 restrictions in China are expected to prevent production levels hitting their potential. Despite the issues, broader scale-ups in Tesla’s manufacturing operation thanks to new sites in Berlin and Texas coming online are believed to give the company a good fighting chance of hitting Musk’s 1.5 million cars target.
The hugely successful and often controversial entrepreneur told analysts that the ambition was to eventually be manufacturing 20 million vehicles a year, boasting “we’re obviously not demand-limited”.
The Tesla share price, which is down 18.55% for the year-to-date as a result of a broad market sell-off of growth stocks has won back the lion’s share of the 5% it declined by during trading hours yesterday in after hours dealmaking and currently stands to open today at $1018.72.
Media coverage of Musk has, in recent weeks, been more focused on his $43 billion bid to take the microblogging social media platform Twitter, of which he is a frequent user and poster, private. He also runs the satellite launch and space exploration and tourism company SpaceX as well as other ambitious businesses including The Boring Company, designed to make the excavation of underground tunnels for the futuristic HyperLoop transport system more cost efficient.However, yesterday’s focus was on Tesla, which delivered a record 310,048 cars over the first quarter despite ongoing supply chain challenges. A global shortage of the semiconductor designs used in modern vehicles is one of the core issues impacting almost every automaker. If it weren’t for the supply issues and analysts’ concerns over the suspension of production at Tesla’s Shanghai plant, which has restarted in a limited way, due to tough Covid-19 restrictions the likelihood is that the Tesla share price would have been further boosted by the record first quarter.
The company commented:
“Challenges around [the] supply chain have remained persistent and our team has been navigating through them for over a year. In addition to chip shortages, recent Covid-19 outbreaks have been weighing on our supply chain and factory operations.”
The prices of some of the raw materials Tesla uses in its production have also suffered from considerable inflation in recent months. However, the company has been able to pass that on to buyers, protecting margins with “adjustments in our product pricing”. However, Tesla also reassured would-be buyers of its cars, and investors, that it was focused in reducing manufacturing costs where possible to help offset increases to overheads. But price increases for Tesla buyers has comfortably exceeded costs inflation thanks to considerable waiting lists for the company’s cars.
The 50% growth in delivery forecast for the current year is contingent, said Tesla
“on our equipment capacity, operational efficiency and the capacity and stability of the supply chain. Our own factories have been running below capacity for several quarters as supply chain became the main limiting factor, which is likely to continue through the rest of 2022.”
Musk also highlighted Tesla’s plans for the release of a self-driving taxi service, which he believes will be a “massive driver of Tesla’s growth” from 2024 when production is planned to start. The company is also developing a humanoid robot that has been named Optimus. Musk stated his “firm belief” was that the robot business will eventually be “worth more than the car business”.
