Tesla Earnings Are a Hit, but Economic Headwinds Still Linger

Revenue of $24.3bn for the electric car company was slightly higher than the $24.07bn predicted by analysts and 33% growth year over year, suggesting that the automaker may be doing better than expected in the face of a number of concerns, such as a slipping demand for its cars, logistical holdups, an aged product portfolio, and heightened rivalry from competing manufacturers.

Tesla‘s stock price fell precipitously in 2022, dropping as much as 65% over the course of the year. According to Bloomberg, the collapse significantly reduced Musk’s personal wealth, earning him the unpleasant distinction of becoming the first person in history to suffer a $200 billion loss.

A post-market rally sent Tesla shares up by more than 4% following the release of the report. During Wednesday’s trading session, the stock price reversed upward, rising 0.4% to $144.34 according to ActivTrades’ data. The ActivTrades’ market sentiment indicator shows that its traders are highly bullish on the share, as 92% of all traders are buyers and 8% only are sellers.

Inside the Latest Tesla Earnings

On Wednesday, during the conference call with investors, Musk stated that demand this year had been the greatest the company has experienced so far. In comparison to the $2.32 billion, or 68 cents per share earned from a year earlier, net profit for the final quarter of 2022 was $3.69 billion, or $1.07 per share.

Annual revenue rose to $81.46 billion, up 51% from $53.82 billion in the previous fiscal year. In 2022, the automotive side of the business generated $71.46 billion of the total $81.46 billion in revenue. The operating margin came in at 16.8% for the year, compared to 12.1% the previous year. Earnings from carbon emission reductions also rose 21%, totaling $1.78 billion.

The majority of these yearly outcomes may be attributed to Q4 than any other quarter, with sales of $24.32 billion (up +37.0% on Q4/2021), with $21.31 billion attributable to the car sector, and a GAAP surplus of $3.69 million (+59.0% Year-over-Year).

The amount of EVs that Tesla delivered during the fourth quarter of 2022 was 405,278. This brought the total number of vehicles shipped out throughout the whole year to 1,313,851, a rise of 40% compared to 2021. Even more impressive is the 47% rise in production despite headwinds from shortages of parts and factory closures in China.

The market leader in EVs said that it will raise production “as quickly as possible” and claimed it was on target to produce around 1.8 million cars in 2023 in keeping with earlier predictions for average annual growth of 50%. However, the company also gave itself some leeway, indicating that, depending on a variety of unexplained circumstances, it may expand more quickly or more slowly.

Margins Are Getting Tighter as a Price War Takes Off

Tesla recently lowered the price of its vehicles across multiple major markets including the US, Europe, South Korea, Japan, Australia, and Singapore, starting a pricing war for EVs that will undoubtedly increase Tesla’s deliveries and put other established manufacturers to the test.

Late last year, Musk said that “radical interest rate changes” had driven up the cost of all vehicles, both new and used, and that Tesla would drop prices to maintain volume growth, even though doing so would also reduce profits.

The carmaker earlier this month announced a reduction in pricing for its Model Y and Model 3 vehicles by up to 20% in its most recent attempt to boost demand after many quarters of underwhelming delivery.

Tesla looks to be surrendering the profit margins that Wall Street praised while the business was facing production restrictions in order to keep expanding and fully use the factories that it has established or expanded in the previous year.

With the new Tesla pricing and the U.S. subsidy that kicked in this month, a customer in the United States may save 31% on a long-range Model Y. Moreover, Tesla’s new action expanded the range of its automobiles that qualify for the Biden administration’s tax credit.

Tesla shares somewhat recovered their losses in January after the announcement of price drops. It would seem that the price cuts helped convince investors that Tesla had a strategy to continue to maintain its dominant position in the electric vehicle market.

CEO Stretched Thin

Musk’s schedule was already packed as the CEO of Tesla and SpaceX, but when he became Twitter’s CEO in October 2022, it understandably became a major source of stress for him. Musk in November last year stated during an on-stage interview with billionaire mutual fund manager Ron Baron, whose business, Baron Capital Group, sponsored the conference, that his work week increased from 70 to 80 hours to a staggering 120.

Musk has said before that he would step down as Twitter CEO once a successor is found, but up until now the public has not been given any new information on the search.

The CEO is no stranger to getting tangled up in controversy over some of his Twitter antics. He happens to be in court at the moment, defending himself from an infamous tweet from five years ago about taking Tesla private. After investors claimed the 2018 tweet cost them millions of dollars when a transaction fell through, the CEO of the electric vehicle firm is now on trial for fraud.

According to Musk, a meeting with a Saudi Arabian sovereign wealth fund revealed support for a transaction, but he acknowledged that he never brought forward a precise financing figure in the first place.

After tweeting on August 7, 2018, that he had a deal organized to take Tesla private for $420 (£341) per share, and that there was “funding secured,” Mr. Musk is accused of misleading investors.

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