Tesla Margins Clipped but Execs Still Eyeing 50% Growth in ’22

Stung by having to shut down its Shanghai factory for extended periods of time because of COVID-19 flareups, Tesla Inc. reported lower revenues, profits and margins in the second quarter than it had early this year. But CEO Elon Musk and his leadership team told analysts and investors they are upbeat about ramping production to record levels in the second half of the year.

Austin-based Tesla produced net income of nearly $2.3 billion on total revenues of $16.9 billion in the three months ended June 30. Those numbers were down $3.3 billion and nearly $18.8 billion in the first quarter but still up 98% and 42%, respectively, year over year.

The company delivered about 255,000 units in Q2 versus 310,000 in the previous quarter. CFO Zach Kirkhorn said its previously stated 50% production growth for all of 2022 remains doable but has become more difficult because of the Shanghai shutdowns. Elsewhere in Tesla’s factory network, production at its Berlin plant topped 1,000 vehicles per week in June and Musk said its Austin complex—which formally opened in April—should top that milestone “hopefully in the next few months.”

“I think a 40,000-car week is within reach by the end of this year,” Musk said, noting the company has several times this year produced more than 30,000 vehicles in a given week.

To reach 50% production growth for 2022, Tesla would have to crank out a shade under 1.4 million vehicles. Based on its first-half work, the company will have to average 32,000 units per week versus the roughly 22,000 COVID-affected average from the first and second quarters.

Tesla’s operating margin for the quarter was 14.6%, up from 11.0% in the same period of 2021 but down from more than 19% in Q1. On a June 20 conference call, Musk bemoaned the force majeure events and “supply chain hell” his team has had to deal with in recent quarters but noted that Tesla’s production rate is now again at record levels and said he hopes the company can deliver its first Cybertruck in the middle of next year.

Also discussed in Tesla’s earnings statement and conference call:

• The company sold three-quarters of its Bitcoin holdings during the quarter to generate cash while it remained unsure about the return of Shanghai to full production. The move generated $936 million in proceeds and boosted its quarter-end cash holdings to $18.3 billion. The company’s total assets were valued at $68.5 billion on June 30.
• Musk said he’s hopeful the Tesla will be able to solve the highly-publicized problems with its full self-driving software system by year’s end, even though he acknowledged that he has regularly expressed similar optimism that didn’t turn out to be justified.

Tesla shares (Ticker: TSLA) rose about 1.5% to roughly $755 in after-hours trading July 20. They began 2022 at about $1,200.