Tuesday, November 30, 2021

Tesla Reaches Record Profits Despite Parts Shortages and Delays in Delays

DETROIT (AP) – Record sales of electric vehicles last summer amid shortages of computer chips and other materials led Tesla Inc. to the largest quarterly net income in its history.

The company said Wednesday that it earned $ 1.62 billion in the third quarter, breaking the old record of $ 1.14 billion set in the second quarter of this year. The profit was nearly five times the $ 331 million Tesla made in the same quarter a year ago.

Revenue of $ 13.76 billion from July to September also hit a record high, according to FactSet, but fell short of Wall Street’s expectations of just over $ 14 billion.

Excluding special items like stock-based compensation, Palo Alto, California-based Tesla earned $ 1.86 a share, beating analysts’ estimates of $ 1.62. CEO Elon Musk said he is moving the headquarters to Austin, Texas as of Wednesday’s earnings release date.

However, some quarterly profits were generated from the sale of regulatory loans to other automakers. Tesla raised $ 279 million in loans during the quarter.

“A host of issues, including shortages of semiconductors, port congestion and constant power outages, affect our ability to keep factories running at full speed,” the company said in a statement to shareholders.

Tesla said earlier this month that it delivered a record 241,300 electric vehicles in the third quarter, despite battling shortages that have hit the entire auto industry. Most automakers reported declining U.S. sales in the last quarter due to chip shortages and other shortcomings, including General Motors and Ford.

Musk previously stated that Tesla maintains its production lines mainly by sourcing chips from alternative suppliers, and then struggles to rewrite some of the software in its cars to ensure that all technologies are compatible.

Third-quarter sales were up 72% from Tesla’s 140,000 shipments in the same period a year ago.

So far this year Tesla has sold about 627,300 vehicles. This allows the company to significantly surpass last year’s figure of 499,550 employees.

While Q3 sales were up, the average price fell 6% as Tesla sells the less expensive Model 3 and Y and the less expensive Model S and X.

Tesla also suffered a $ 51 million impairment loss due to the decline in the value of its bitcoin holdings.

Musk did not appear at the conference call this quarter with analysts and investors. Earlier, he said that he would only appear when he needed to say something important.

Thereafter, Chief Financial Officer Zachary Kirkhorn and Vice President of Automotive Engineering Lars Moravi answered questions.

Kirkhorn said the company was able to achieve an operating margin – pre-tax after variable operating costs – just under 15%.

But Kirkhorn said Tesla could face some challenges in the future that could threaten those margins, including rising commodity prices and labor shortages. Tesla says the largest part of Tesla’s costs comes from nickel, which goes into battery cells, and aluminum, which the company uses for other non-battery components. Tesla will also face inefficiencies as it kicks off production in new factories in Texas and Germany next year, he said.

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According to Kirkhorn, the company is already seeing a rise in commodity prices, which has driven up prices. Perhaps Tesla will see more next year. “It’s hard to say for sure, but volatility and growth are so significant,” he said.

Tesla executives also publicly commented for the first time on numerous investigations of the company’s activities by US regulators. Moravi said Tesla is working together as much as possible.

The National Highway Traffic Safety Administration has launched an investigation into the reasons why Tesla Autopilot driver assistance system continues to run over parked ambulances. Of the dozen accidents that are part of the investigation, 17 people were injured and one was killed.

The safety agency also wonders why Tesla did not recall self-driving cars when it updated its software over the Internet to better recognize fire trucks and police vehicles in low light. NHTSA said the update fixes a security flaw.

Kirkhorn said safety is important to Tesla as the auto industry moves from traditional cars to a more software-centric one. “Regulators understandably have a stake in understanding how to regulate in this environment, and NHTSA is no different,” he said. “We were delighted to be partnered and we will work with all the different regulatory bodies.”

Tesla hasn’t always worked with the security agency, however. In January, Tesla dropped an NHTSA request to recall some 135,000 vehicles because their touchscreens could go black. The agency said the screens are a safety defect, as the rear-view cameras and windshield heater controls can be disabled.

A month later, after the NHTSA began the process of holding public hearings and bringing Tesla to court, the company agreed to the withdrawal.

Tesla also said in a statement to shareholders that construction of its new plant near Austin is progressing according to plan, with the company preparing equipment and “producing our first prototype vehicles.”

The plant, which is downtown compared to Tesla’s other assembly plant in Fremont, California, will ship Model Y small SUVs and new Cybertruck pickups to communities on the East Coast.

Tesla said it expects to rapidly expand its manufacturing capacity and expects annual sales growth of 50% on average over the “multi-year horizon”.

Tesla Inc. Shares fell 1.6% to $ 851.80 after Wednesday’s close.


This story has been corrected to show that Tesla made a net profit of $ 331 million in the third quarter of 2021, not $ 300 million.

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