Tesla’s profits are up, but delivery logistics are down
Tesla Group announced excellent financial results on Wednesday, October 19. Still, its executives acknowledged that they would probably not reach their delivery targets for 2022 and investors continue to question the persistence of demand for expensive electric vehicles.
Tesla boss Elon Musk reiterated on Wednesday, 19 October, that he was not worried about orders, saying that demand was “excellent” for the fourth quarter. In the longer term, “we are not going to reduce our production, recession or no recession” since the transition to electric vehicles is underway, he added.
As of September 30, 2022, the group doubled its net profit in the third quarter to USD 3.3 billion, close to its first-quarter record. It benefited from an increase in deliveries as well as higher prices for its vehicles.
Sales jumped by 56% to USD 21.4 billion, a level never reached before but slightly lower than analysts’ forecasts.
Tesla said its performance was held back by a stronger dollar, higher costs for raw materials and logistics, and expenses associated with ramping up its new factories in Berlin, Austin, Texas, and battery production.
Tesla Group says it is ramping up production “as quickly as possible.” But “logistics volatility and supply chain bottlenecks remain immediate challenges, even as they improve.”
Tesla has officially maintained its long-term goal of growing its deliveries by an average of 50% per year. However, this objective seems complicated to reach in 2022. The group would need to deliver nearly half a million electric vehicles in the fourth quarter to achieve it, compared to 344,000 in the third quarter.
In a conference call, Zachary Kirkhorn, Tesla’s finance boss, said that if the group thought it would produce 50% more vehicles, deliveries would probably be a little below that target because of the longer time it takes to get them to customers. If deliveries are currently behind the production, it is because there are not enough trains, ships and trucks to transport them, says Tesla.
But borrowing rates are skyrocketing, the economy is slowing down, and the cheapest Tesla costs $48,490. Some observers wonder if this is a sign of slowing customer demand, who are more reluctant to spend so much during an economic downturn.
These concerns about demand have contributed to the decline in Tesla’s stock, which has lost more than 35% since the beginning of the year. It lost more than 5% in electronic trading after the close of trading on Wednesday after the release of results.
The stock is also affected by the gloomy mood on the financial markets and the fear that Elon Musk will have to sell even more of his shares to finance his takeover of Twitter.
In the latest episode of this saga, the judge in charge of the dispute between Twitter and Elon Musk has given both parties until October 28 for the Tesla boss to buy the social network. Otherwise, the trial will be held in November.
The entrepreneur said Wednesday, October 19, “enthusiastic” about this operation, believing that Twitter is an asset that “has been languishing for a long time” but has an “incredible” potential. After these comments, the social network’s stock was up 1.7% in electronic trading.
To try to reassure Tesla investors, Elon Musk said that a share buyback program was “likely” and that it could reach 5 to 10 billion USD.
The entrepreneur also said that his group, currently worth USD 696 billion on Wall Street, could eventually be worth more than Apple and Saudi Aramco combined, presently valued at more than USD 4.4 trillion.