Record profits cement Tesla’s long-term outlook

Published January 26th, 2023 - 04:05 GMT
Telsa outlook good on record profits
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ALBAWABA — Electric vehicle powerhouse Tesla on Wednesday announced record profits for its fourth quarter and the full year, sighting tighter profit margins, price cuts and weaker-than-anticipated sales in the quarter as challenges mount.


The EV company confirmed its long-term growth outlook in spite of concerns about ongoing macroeconomic and inflationary pressures and growing competition, coupled with supply chain disruptions, rising interest rates and concerns about the behavior of Elon Musk, its chief executive officer.


In 2022, Tesla's share price fell 65 percent, the worst year ever for the company’s usually high-flying stock, as investors doubted whether the company was reacting preemptively to many of its challenges and risks.


Tesla reported fourth-quarter profits of $3.7 billion, up 59 percent from the year-ago period, marking adjusted earnings of $1.19 per share in the quarter, up from 85 cents a share a year earlier.


For the full year, Tesla’s profit more than doubled to $12.6 billion from $5.5 billion in 2021, marking adjusted earnings per share of $4.07, up from $2.26 in 2021.


Revenues jumped 37 percent to $24.3 billion, fueled in part by a 31 percent rise in vehicle deliveries compared with the year-ago period.


Sales for the year, including revenue from solar panels, energy storage and other businesses, rose to $81.5 billion from $53.8 billion the previous year.


The gross profit margin on sales slipped to 26 percent in the fourth quarter and 31 percent from the same period of 2021.


“It was our best year ever on every level,” Musk said during a conference call with investors, although “2022 was an incredibly challenging year”.


As Tesla faces stiff competition from the likes of Volkswagen, Hyundai, BYD, Ford Motor, Xpeng , General Motors and NIO, it is accelerating its "cost reduction roadmap," while working to ramp up production, as orders outpace production by a two-to-one margin.


The company described its long-term plan as ramping up production growth by 50 percent per year, on average.


"In any scenario, we are prepared for short-term uncertainty," said Tesla, while adding that relentless cost control and innovation will allow it to navigate 2023 better than any of its rivals.


Tesla set a sales target of 1.8 million vehicles for this year, up 37 percent from 2022 sales of 1.3 million vehicles, marking its lowest percentage growth since 2020, when the first year of the pandemic upended sales.


“We know that there are questions about the near-term impact of an uncertain macroeconomic environment, and in particular, with rising interest rates,” it said in its earnings statement. “We are prepared for short-term uncertainty, while being focused on the long-term potential of autonomy, electrification and energy solutions.” 

Musk noted that Tesla's output has been constrained by economy-wide supply chain and raw material shortages, but suggested output could reach two million in 2023 if there is a smooth year free of disruptive surprises.


“It just always seems to be some force majeure thing that happened somewhere on Earth. And we don’t control if there’s like earthquakes, tsunamis, wars, pandemics, et cetera,” Musk said.


“So if it’s a smooth year, actually, without some big supply chain interruption or massive problem, we actually have the potential to do 2 million cars this year. We’re not committing to that but I’m just saying that’s the potential. And I think there would be demand for that, too,” he added.


Tesla’s share price has risen by one-third since the beginning of January but remains more than 60 percent below its November 2021 high.


Shares of Tesla jumped 5.48 percent to $152.35 in after-hours trading on Wednesday and continued its upward mobility to $156.62, at 4:11pm GMT on Thursday.



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