Tesla sales fall short, but Elon Musk promises an ‘epic’ year-end
Tesla Inc. reported sales that fell short of Wall Street estimates, citing delivery and production bottlenecks, but Chief Executive Elon Musk assured investors that demand for his company’s cars remains strong.
Getting cars onto ships and trucks proved especially costly and troublesome in the latest quarter, as much of the electric-vehicle maker’s output was concentrated in the final weeks of the period. That made it tough for Tesla to deliver all the vehicles it has promised — and led Musk to address concerns that demand may be faltering.
“We have excellent demand for Q4 and we expect to sell every car that we make for as far into the future as we can see,” he said on a conference call with analysts and investors Wednesday. “Knock on wood, it looks like we’ll have an epic end of year.”
No production surplus over the last two years even comes close to the 22,093 excess vehicles that Tesla reported in the third quarter.
Investors are paying close attention to how quickly Tesla can increase output of its mass-market Model Y SUV from new factories in Austin and Berlin — a key milestone for the pioneering EV maker. The company blamed its sales miss on difficulties in shipping vehicles at the end of the quarter and said profit growth was tempered by higher costs related to a slower-than-expected ramp-up at its two newest factories.
Eleven more people were killed in crashes involving vehicles using automated driving systems during a four-month period this year, according to newly released government data.
Tesla said third-quarter revenue rose to $21.5 billion, compared with analysts’ projections of $22.1 billion. Profit excluding some items rose to $1.05 a share, exceeding the $1.01 average of estimates compiled by Bloomberg.
Shares of Austin, Texas-based Tesla fell 5.3% in after-hours trading to $210.28. They have declined 37% this year against the backdrop of Musk’s $44-billion bid to buy Twitter and concerns over a slowing economy, higher inflation and rising interest rates.
“Tesla is a company that typically has been beating numbers,” said Gene Munster, managing partner of Loup Ventures, a venture capital firm. “The reaction you’re seeing is that people are a bit taken aback by the fact that they missed.”
To address the transportation bottlenecks, Tesla is trying to smooth its delivery and logistics processes and reduce costly end-of-quarter arrangements.
Those difficulties mean the company is unlikely to achieve full-year delivery growth of 50% this year, even with production probably hitting that mark, Chief Financial Officer Zachary Kirkhorn said on the call.
With driverless car services already operating in Phoenix and San Francisco, Waymo says Los Angeles is next on its list.
In April, Musk said Tesla would produce more than 1.5 million vehicles this year. The company has made 929,910 through the first three quarters — and needs to crank out more than 570,000 in the fourth quarter to meet that target. It produced 305,840 vehicles in the final three months of 2021.
Tesla is sticking to its long-held plans to increase vehicle deliveries by 50% on average annually over multiple years. Musk expects to be on hand for the first Semi Truck deliveries to Pepsi in December. In addition, he said Tesla is in the “final lap” for production of its forthcoming Cybertruck.
Citing the company’s profitability and growing cash balance of $21.1 billion, Musk said on the call that Tesla could repurchase $5 billion to $10 billion of its shares, subject to board approval and review.
He also speculated that Tesla’s market value, now at $696 billion, could one day exceed the combined capitalization of Apple Inc. and Saudi Aramco, two of the world’s most valuable companies. Together, they are worth more than six times Tesla’s capitalization at $4.4 trillion.
Tesla’s automotive gross margin narrowed to 27.9% in the quarter, falling short of the 28.4% average of estimates.
Income from the sale of regulatory credits — used by other automakers to offset greenhouse gas emissions — were $286 million for the quarter, the lowest in a year. Tesla has said it expects such revenue to shrink over time as competitors launch more EVs to comply with emissions regulations and meet growing demand.
