Tesla makes record profit on surge in sales, but competition from electric vehicles heats up
Tesla closed its best year in company history by posting quarterly and annual profit records, fueled in large part by its booming operations in China, as Elon Musk’s powerhouse is poised. to face significant competition in the rapidly growing market for battery-powered vehicles. Mercurial CEO Musk also said the automaker won’t be adding the Cybertruck or another new vehicle to its lineup in 2022.
The company said today that it earned $2.05 per share on a GAAP basis in the quarter that ended December 31, 2021, up 750% from a year ago. Excluding certain items, EPS was $2.54 per share, beating analysts’ expectations of $2.26. Net income for the period was the best ever at $2.32 billion, an eightfold increase, while revenue beat expectations at $17.7 billion. Net profit for the full year was $5.5 billion and revenue was $53.8 billion.
“2021 has been a breakthrough year for Tesla and for electric vehicles in general. As we battled, and everyone else did, with supply chain challenges throughout the year, we were able to grow our volumes by nearly 90%,” Musk said. during a call for results. “In addition, we achieved the highest operating margin in the industry, last quarter, at over 14% GAAP operating margin.”
For a decade, Tesla had little real competition in the electric vehicle market, but that’s changing fast. Automakers, including General Motors, Ford, Hyundai, Volkswagen and Toyota, are all investing billions of dollars to roll out dozens of new battery models and to upgrade and expand production capacity to build them. At the same time, a new generation of startups, including Rivian, Lucid and Fisker, are also ramping up production of electric models that will directly compete with Tesla’s lineup. Some of the new vehicles will be priced lower than Tesla’s, the cheapest of which, the Model 3 sedan, costs around $50,000 after taxes and other fees.
The positive results come after Tesla said earlier this month it delivered 936,172 electric vehicles to global customers last year, including 308,600 in the fourth quarter. Sales to customers in China and exports from that market have been the main source of growth for the Austin, Texas-based company over the past year, after opening its Shanghai factory about two years. Analysts expect volume to continue to increase throughout 2022 as production begins at its new Austin plant and Tesla’s Giga factory opens in Berlin, Germany, its first. in Europe.
“The all-important auto (gross margin) was 30.6% vs. 29.2% for the street, highlighting the greater efficiency Tesla is seeing with Giga in China, despite chip/chain issues. supply,” Dan Ives, equity analyst for Wedbush. Securities, said in a research note. “Operating cash was $4.59 billion versus $2.32 billion for the street, speaking to a company on track to generate significant cash flow over the next several years.”
Tesla recorded $314 million in emissions credit sales to other automakers in the quarter, a longtime source of free funds. It brought in $1.47 billion from those sales in 2022, down from a 2020 high of $1.58 billion. Chief Financial Officer Zachary Kirkhorn said revenue will decline next year, though credit sales Tesla’s cumulative revenues total $5.36 billion since 2008.
No Cybertruck or Tesla Semi in 2022
The company will strive to further increase production in 2022 and therefore will not introduce new models, such as the Cybertruck, Roadster or the delayed Tesla Semi.
“Tesla’s fundamental focus this year is scale output. Last year and this year, if we were to introduce new vehicles, our total vehicle production would go down,” Musk said, citing supplies. limited in semiconductors and other components.
Nor is there a $25,000 Tesla vehicle in the works. The company will make a lower-cost vehicle “at some point,” Musk said, but “we have enough on our plate right now, too much on our plate, frankly.”
Neither Musk nor Kirkhorn provided a specific growth target for this year, due to continued concerns over supply chain issues. The company said before the call that “over a multi-year horizon, we expect to achieve 50% average annual growth in vehicle deliveries.”
The Austin and Berlin plants began building vehicles in the fourth quarter, according to Musk, though he didn’t say whether they were salable units or test production models.
Tesla shares rose 2% to close at $937.41 on Nasdaq ahead of the earnings release. The title is down 11% since the start of the year.
Musk did not comment on ongoing reviews by federal safety regulators and the California Department of Motor Vehicles of the company’s Autopilot driver-assist feature that is linked to numerous crashes. Instead, he repeatedly touted the future benefits of the company’s so-called complete self-driving system and the eventual creation of Tesla robotaxis.
“There are several deep FSD stack enhancements coming in the next few months,” he said. “I would be shocked if we didn’t achieve fully autonomous driving even this year.”
Despite Musk’s enthusiasm for it and the claim that the company was making progress and might be able to deliver something in the coming months, Tesla’s ability to deliver true self-driving technology remains elusive. He has repeatedly said the company is close to being on track, previously setting a missed end-2020 target on the company’s 2019 Empowerment Day.
Coincidentally, Tesla’s earnings release and Musk’s comments come the same day President Joe Biden welcomed auto and motor companies to the White House, including the CEOs of GM, Ford and Cummins, to discuss his blocked Build Back Better legislation that would provide billions of dollars in new funding to expand EV production and improve incentives for consumers to buy them.
Musk, whose company has benefited heavily over the years from federal loans and electric vehicle incentives, is a vocal opponent of Build Back Better.