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Tesla reports fourth quarter revenue of $24.3 billion, beating Street estimates TechCrunch

Tesla just beat Wall Street’s revenue estimates for Q4 2022. The company ended the fourth quarter with revenue of $24.3 billion, up 37% from the same quarter last year and up 13% quarter over quarter. Analysts had expected the company to earn about $24.2 billion Yahoo Finance data.

The electric vehicle maker had $1.4 billion in free cash flow at the end of the fourth quarter, which is less than the $3.3 billion the company had in the bank at the end of the third quarter.

Tesla’s stock spiked 3.2% to $149 per share immediately after earnings fell and continued to climb to $151.52 in after-hours trading.

The effect of price reductions on margins

Investors were looking for gross margins today after Tesla slashed prices and offered multiple discounts on its vehicles. While Tesla as a whole ended the quarter with an operating margin of 16%, automotive gross margins were 25.9%, the lowest in the last five quarters.

Margins in the first quarter of 2023 may look worse, says Eric Schiffer, the CEO of private equity firm Patriarch Organization.

“The outlook will still depend on recent developments in the first quarter, which indicate some demand pressure,” Schiffer told TechCrunch, referring to the January price cuts.

Tesla acknowledged that auto margins will be impacted in the near term by the price drop and the general inflation environment, but the company’s management is more focused on operating margin.

“As other parts of the business become more important, especially the energy sector, which is growing faster than the automotive sector, we are very focused on operating leverage here and improving the efficiency of our overheads,” said Zachary Kirkhorn, chief financial officer of Tesla. officer, during Wednesday’s earnings call.

During the call, CEO Elon Musk wanted to address demand concerns by saying that after the company slashed prices, January saw the strongest demand ever in Tesla’s history. He even said that demand is greater than production.

Earlier this month, Tesla reported vehicle deliveries of 405,278 in the fourth quarter. While those were record deliveries, the automaker still missed Wall Street estimates for the third straight quarter. Similarly, Tesla’s 1.3 million vehicle deliveries in 2022 were also a record for the automaker, but that number falls short of Tesla’s own guidance to achieve 50% year-over-year growth and reach 1.4 million deliveries.

Regardless, Tesla still plans to grow production as quickly as possible “in line with the 50% CAGR target we moved toward in early 2021,” and reach 1.8 million cars by 2023. During Wednesday’s earnings call, Musk said Tesla has the potential to hit 2 million cars this year, but is cautious given market uncertainty.

Prioritize “affordability”

The company acknowledged that average sales prices “have generally been on a downward trajectory for many years,” and that Tesla wants to prioritize “affordability” so it can grow into a company that sells several million cars annually.

“Price really matters,” Musk said. “The large number of people who want to buy a Tesla car cannot afford it. And so these price changes are really making a difference to the average consumer.”

Musk went on to say that Tesla is working on cost containment measures such as factory efficiencies, which will manifest this year in increased production at the new Berlin and Austin gigafactories, better supply chain control and even design changes, particularly to the powertrain.

Tesla also announced plans earlier this week to invest an additional $3.6 billion at its Nevada gigafactory to build a battery cell facility and a semi-truck factory. As for battery cells, the company’s long-term goal is to “get well over 1,000 gigawatt-hours of internally produced cells,” Musk said, noting that the company would also rely on third-party battery cell makers like Panasonic to drive costs down and efficiency up. Musk also nodded to Tesla’s plan to create a low-cost, high-energy-density 4680 cell.

The electric car tax incentives for vehicles manufactured in the U.S. and with battery components sourced from the U.S. or countries with a free trade agreement could also help Tesla lower its prices, Kirkhorn said.

“We also want to use these incentives to improve affordability as we consider what the price points are for our products going forward,” said Kirkhorn.

Reducing the cost of the vehicles will also be a necessity for the automaker as it, like all others, faces macroeconomic pressures, a looming recession and increasing competition from other automakers.

“Tesla is not immune [to] the recession, and I still expect more recession-induced market pain,” said Schiffer.

Autonomy, electrification and energy solutions

Tesla said it remains focused on “autonomy, electrification and energy solutions”. The company’s energy storage division finished 2022 with its “highest level” of deployments ever. Energy storage deployment increased 152% from the fourth quarter in 2021 to 2.5 GWh, for a total 2022 deployment of 6.5 GWh. Tesla said demand for its storage products is “exceeding [its] ability to deliver.” The company said it is ramping up production at its 40 GWh Megapack plant in Lathrop, California, to meet demand.

Tesla’s solar deployment also increased 18% year-over-year in Q4 to 100 MW, with a total of 348 MW of solar power by 2022.

When it comes to Full Self-Driving (FSD), Tesla’s advanced driver assistance system, Tesla said it sold its beta version of the software to about 400,000 customers, bringing in $324 million in revenue as part of the company’s car sales.

Tweeting to Elon

An investor asked Musk if his constant stream of awareness on Twitter could cause the Tesla brand to lose popularity and create divisions among customers, impacting demand. Musk dismissed this concern and pulled out his Twitter account to showcase his 127 million followers, which “suggests I’m, you know, pretty popular.”

“Twitter is actually an incredibly powerful tool for driving demand for Tesla,” Musk said. “Twitter’s net worth, aside from a few people complaining, is gigantic. Clearly.”

Production of cyber trucks will increase in 2024

Musk also addressed the long-delayed Cybertruck, a vehicle he said he will definitely drive once it comes off the assembly line.

The CEO confirmed that production of the truck is likely to start as early as this summer, but SOP is slow, he said. Only then will volume production really get going and that is planned for next year.

Tesla said it has begun installing the production equipment for the Cybertruck in Texas and has built all of its beta vehicles, with more to come in the coming month.

The company will be sharing more details on upcoming plans across the board during investor day on March 1.

Correction: An earlier version of this article stated that Eric Schiffer was a Tesla investor, which he is not.

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