Tesla Reported Record Revenues, Dismissed Demand Concerns

Strong Financials

Tesla Motors Inc announced strong results for the fourth quarter of 2022 [1] on Wednesday January 25, after US markets closed, easily beating estimates. Its Revenue grew 37% year-over-year, to a record $24.318 billion, despite a $1.4 billion negative FX impact.

Its operating Income also hit all-time highs at $3.9 billion, while the solid 16% Operating Margin marked an improvement on a yearly basis, but was lower compared to the third quarter. The firm delivered Earnings of $1.19/share, up 43% y/y.

For the whole of 2022, financials were equally impressive with Revenue jumping 51% to over $80 billion, against a very difficult backdrop. High inflation, aggressive monetary tightening by the Fed and other central banks around the world, trade disruptions and other factors, harmed Wall Street and Tesla's stock price, which slumped last year.

CEO Elon Musk alluded to these headwinds, mentioning "forced shutdowns, very high interest rates and many delivery challenges", but in spite of those issues, he touted a "fantastic year" for the electric vehicle maker. [2]

Production & Delivery

The last year was all about ramping up production, which hit new records, as 437,701 vehicles rolled of the factories in the fourth quarter and 1,369,611 in the whole of 2022. The latter marked an impressive 47% surge compared to 2021, roughly in line with Tesla's goal.

More to it, Tesla's two newest factories - in Berlin and Austin - which were inaugurated less than a year ago, both managed to produce more than 300,000 Model Y's per week towards the end of the fourth quarter.

For the current year, the firm expects to a rather timid production of 1.8 million cars, but Mr Musk, said during the earnings call that their internal production potential is "actually closer to 2 million". [2]

All-time highs were hit on the delivery front as well, since they surpassed 400,000 units in Q4 for the first time in history, while 1,313,851 units were handed over during the entire 2022. However, the widening production/delivery gap in the last quarter is a source of concern.

In the previous earnings call back in October, CFO Zach Kirkhorn had warned that 2022 delivery growth would be "just under" the 50% target [3], but the actual 40% increase achieved, was far more underwhelming.

Demand Fears

This miss in deliveries and recent price cuts by the king of the electric vehicle market, have sparked fears over demand among many investors and Musk addressed this issue right off the bat, during the earnings call.

He touted the "strongest orders" in the firms history so far in January, which are twice the rate of production. We carried on expressing the belief that demand "will be good despite probably a contraction in the automotive market as a whole". [2]

He also noted that price "really matters" and the recent cuts "really make a difference for the average consumer". Despite those reductions and the adverse impact on profitability, Tesla's margins remained very robust.

Increasing Competition

Tesla was focused on scaling up last year, instead of launching new models, but managed to begin deliveries of the Semi truck in December, with Pepsi being the first customer. However the company is expected to produce the long-awaited Cybertruck in 2023 and the Roadster as well.

The CEO reaffirmed that the start of productions of the futuristic pickup truck is placed "sometime this summer", but volume production will be reached in 2024. He also talked of an "incredible product" that will be the car he will "drive every day". [2]

However, it has already been more than three years since the impressive model was first unveiled and in the meantime, startup and legacy automakers are making strides on the electric truck front and the EV market overall.

Rivian Automotive beat everyone to the market with the R1T, which was named 2022 Truck of the Year by MotorTrend [4]. This year the accolade went to the Ford Motor Company, for the F-150 Lightning [5], the electric variant of America's beloved pickup. Deliveries started around half a year ago, with 15,617 units sold in 2022, helping Ford become the second largest EV maker in America, behind tesla. [6]

The newly launched electric SUV Avenger by Jeep of Stellantis (STLA.fr), received the 2023 Car of the Year award, with Volkswagen's ID Buzz minivan coming second. [7]

The Musk Factor

Tesla had a rollercoaster ride last year, consisting of many highs and lows, amidst a broader challenging environment for big tech, with its stock plunging. However, it managed to navigate supply chain disruptions better than most of its competitors and some of the recent headwinds could potentially dissipate.

In my view, much of Tesla's success and appeal (or not) will continue to rely on its prolific CEO, who is seen as infallible by many investors and Tesla aficionados. However, his often divisive views and erratic behavior may have dented his popularity and the Twitter saga has not reflected well on the EV maker.

A YouGov survey showed that Elon Musk's popularity declined to 19% in Q4 2022 - the period he took over Twitter -while being disliked by 48% [8]. During Wednesday's earnings call he claimed that his 127 million followers on the social media platform, suggest he is "reasonably popular".

It also remains to be seen whereas he can successfully lead Tesla, SpaceX and Twitter at the same time, although he has said he intends to step down from the social media firm. [9]

Stock Movement

TSLA.us slumped by around 65% in the previous year, while offloaded sizeable chunks of the stock. In the latest such move he sold more than 19 million stocks , according t a series of SEC filing published November 8. [10]

TSLA.us hit the lowest levels since August 2020 at the start of the year, but rebounds and runs a profitable month, as broader market sentiment has improved on hopes for a fed pivot. The stock rises in today's pre-market following yesterday's strong results and as the firm assuaged fears over demand.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 26 Jan 2023 https://tesla-cdn.thron.com/static/SVCPTV_2022_Q4_Quarterly_Update_6UDS97.pdf

2

Retrieved 26 Jan 2023 https://www.youtube.com/watch

3

Retrieved 26 Jan 2023 https://www.youtube.com/watch

4

Retrieved 26 Jan 2023 https://www.motortrend.com/news/rivian-r1t-2022-truck-of-the-year/

5

Retrieved 26 Jan 2023 https://insideevs.com/news/626750/ford-f150-lightning-motortrend-truck-of-the-year/

6

Retrieved 26 Jan 2023 https://s201.q4cdn.com/693218008/files/doc_news/2023/01/December-2022-Sales-Release-Final.pdf

7

Retrieved 26 Jan 2023 https://www.caroftheyear.org/

8

Retrieved 26 Jan 2023 https://yougov.co.uk/topics/economy/explore/public_figure/Elon_Musk

9

Retrieved 26 Jan 2023 https://twitter.com/elonmusk/status/1605372724800393216

10

Retrieved 17 Jun 2024 https://ir.tesla.com/sec-filings

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