Electric car manufacturer: Tesla doubles profit and disappoints

Tesla defied inflation and a sluggish economy to more than double earnings in the third quarter. The US car company’s sales also climbed to a record high – and still fell short of expectations.

Despite high inflation and global economic concerns, Tesla increased profits significantly in the third quarter. The bottom line is that the electric car maker earned $3.29 billion in the three months ended September, more than twice as much as a year ago. Tesla announced this yesterday after the US stock market closed.

Revenue increased 56 percent to a record $21.45 billion but missed market expectations. Analysts had expected sales of $22 billion. The stock fell 5 percent in after-hours trading. The shares have lost about half their value since their record high in November.

Strong dollar and inflation weigh

According to company information, the strong dollar has depressed the result. Tesla suffered a $250 million negative exchange rate effect on its earnings. The US company also referred to increased logistics costs and difficulties in organizing the transport of vehicles. “Inflation in raw material costs impacted our profitability along with the inefficiencies of the new factories in Berlin and Texas and the production of the new 4680 batteries,” Tesla said. “There are still challenges that we haven’t overcome yet. No question about it,” said managing director Andrew Baglino.

However, Tesla CEO Elon Musk added that production of the 4680 battery is picking up speed quickly. In general, he tried to spread optimism during the obligatory conference call with financial analysts after the quarterly figures were presented. “It looks like we’re going to have an epic end of the year,” the tech billionaire announced, promising a “record-breaking” final quarter. Musk brushed aside concerns that a recession looming in the face of persistently high inflation rates and rising interest rates could slow down business: “We have excellent demand”.

“I wouldn’t say we’re recession-proof, but certainly recession-resistant,” he said. According to analysts, however, the downturn in the economy will not leave the world’s most valuable automaker unscathed. Signs of this are expensive inventories – a novelty for the electric car pioneer, which has always produced fewer cars than it has been able to sell.

Musk is optimistic – because of Twitter?

Musk said he sees Tesla on course to outperform Apple and Saudi Aramco — the world’s most heavily traded companies — over the long term. For comparison: Apple is worth 2.3 trillion dollars on the stock market, the oil production company Saudi Aramco has a market capitalization of 2.1 trillion dollars. Tesla currently brings it to a good 695 billion dollars.

Musk promised “significant” share buybacks to boost Tesla stock, which has already fallen 37 percent this year. A buyback program could therefore have a volume of five to ten billion dollars and begin next year. The richest person in the world, who is currently also causing a stir with his SpaceX subsidiary Starlink, could definitely use a rising share price. He’s the largest shareholder — and his plan to buy Twitter could soon force him to cash in on more Tesla shares.

The analysts expect the same. So they weren’t surprised that Musk would be upbeat about Tesla. The deadline is October 28 to close the Twitter deal. Musk said about the billion-dollar deal that he and other investors “obviously” paid too much for the online network. However, Twitter also has “incredible potential”.

Delivery destination apparently still possible

Meanwhile, Tesla delivered almost 344,000 electric cars in the past quarter, setting a new record. Nevertheless, it seems uncertain whether the group can achieve its ambitious goal of increasing deliveries in 2022 by 50 percent compared to the previous year.

To do this, Tesla would have to have more than 1.4 million vehicles for the year as a whole and deliver more than half a million cars to customers in the final quarter. Tesla explained that the growth rate will depend on various factors, including component availability and supply chain stability. CFO Zach Kirkhorn emphasized at the analyst conference that Tesla still expects to achieve the annual target of 50 percent growth.

Tesla does not fear a possible energy crisis in Europe with its car factory in Grünheide near Berlin, said Kirkhorn: “That’s not something we’re too worried about.” Tesla wants to continue increasing production at its plants as soon as possible. Logistics and bottlenecks in the supply chains remain “immediate challenges”, but the situation is improving. The group has so far coped better than many other manufacturers with the supply bottlenecks for important components such as computer chips. However, a Covid lockdown in China threw back Tesla’s large auto plant in Shanghai in the previous quarter.