Business Essentials for Professionals


Tesla Is Attempting To Assuage Demand Concerns About A Possible 2022 Delivery Target Miss

Tesla Is Attempting To Assuage Demand Concerns About A Possible 2022 Delivery Target Miss
Tesla Inc announced that the leading electric car maker of the world was likely to not live up to its vehicle delivery target for the current year, but it also sought to downplay worries about weakening demand now since revenue fell short of Wall Street expectations.
On a conference call with analysts, CEO Elon Musk stated that there was excellent demand in the fourth quarter, addressing investors' concerns that the weak global economy and high Tesla vehicle prices would discourage buyers.
Can investors act as change agents? Your wealth could help address some of the most pressing issues we face, such as climate change, poverty, and energy security. Discover how.
However, Tesla stated that some logistics issues would persist, with fourth-quarter deliveries increasing by less than 50% while production increased by 50 per cent.
"I wouldn't say we're recession proof, but it's certainly recession resilient," Musk said.
Previously, Tesla stated that it aimed for a 50 per cent increase this year from the 936,172 vehicles delivered in 2021.
Its stock dropped nearly 6 per cent in after-hours trading.
Despite global economic concerns, Tesla is rapidly expanding, and investors are looking for signs that consumer demand is cooling as inflation rises and interest rates rise.
"This quarter was not rainbows and roses and it leaves investors wanting more from Tesla which is held to a higher standard than every other automaker," Wedbush analyst Daniel Ives wrote in a client note.
"Tesla must now prove again to the Street that the robust growth story is running into a myriad of logistics issues as opposed to demand softening with EV competition coming all angles around the globe."
The electric carmaker's third-quarter automotive gross margin was 27.9%, which fell short of analysts' expectations and was down from 30.5% a year ago.
According to IBES data from Refinitiv, revenue for the third quarter was $21.45 billion, a record but short of analysts' estimates of $21.96 billion.
The company reported a $250 million negative foreign exchange impact on earnings as the US dollar strengthened against other major currencies.
"Raw material cost inflation impacted our profitability along with ramp inefficiencies" from its new factories in Berlin and Texas, and the production of its new 4680 batteries, according to Tesla's statement. Musk added that production of the 4680 battery was gaining rapid traction, although executive Andrew Baglino said, "There are challenges still ahead that we have not yet surpassed. No doubt."
Musk also stated that Tesla's Semi trucks, which will begin shipping to customers in December, will not use the 4680 battery cells.
Musk also stated that the company has the ability to conduct a stock buyback in the $5 billion to $10 billion range, subject to board review and approval.
Tesla announced earlier this month that it delivered 35% more vehicles in the July-September quarter than in the previous quarter, thanks in part to a rebound in China output following lengthy COVID-19 disruptions, but the record number fell short of vehicle production and analyst expectations.
The electric vehicle pioneer's stock has dropped roughly 50% from its record highs in November, as investors became concerned about a global economic slowdown and Musk's bid to buy Twitter.
Musk stated during the conference call that Tesla has the potential to be worth more than Apple Inc and Saudi Aramco combined. Tesla's market capitalization is now less than $700 billion, while Apple is worth $2.3 trillion and Saudi Aramco is worth $2.1 trillion.
Analysts expected Musk to be upbeat about Tesla during the conference call. Musk has been attempting to raise funds in order to fund his $44 billion deal to take Twitter private.
According to some analysts, Musk may need to sell another $3 billion in stock after the earnings announcement to help fund the deal.
Musk expressed excitement about his pending acquisition of Twitter Inc on Wednesday, though he claimed he and other investors were overpaying for the social media company.
Musk also stated that Tesla's Cybertruck pick-up truck would go into production in the middle of next year, and that its heavy duty semi truck could sell 50,000 units in North America by 2024.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc