Tesla 2022 Q2 Earnings Beat Expectations

After the executive exodus, layoffs and factory shutdown fiasco, Tesla slammed on the brakes with its second-quarter earnings report.

In the second quarter, Tesla reported revenue of $16.9 billion, up 42 percent year-over-year but still down 9.7 percent sequentially from $18.76 billion in the first quarter. Auto-related revenue was $14.602 billion, up 43 percent year-over-year but down 13.4 percent sequentially.

This is the first year-over-year decline in quarterly earnings for Tesla since 2020.

The momentum of this electric giant, which has been surging forward, seems to be no longer brave.

But reviewing Tesla's performance so far this year, there are still many nodes worth remembering, such as models equipped with 4680 batteries have been delivered, the Berlin plant capacity began to climb, historical production exceeded 2 million, the capacity of each factory set a single-month historical record ...

And Tesla's performance in the second quarter, also exceeded analysts' expectations, where revenue was higher than analysts' expectations of $16.88 billion. Earnings per share of $2.27, up 57% year-on-year, higher than analysts' expectations of $1.83.

So Tesla's Q2, what signals are conveyed?

4 "ringgit", the second half of the capacity explosion

Under the constraints of the objective environment in the second quarter, Tesla had four "ringgit declines".

Delivery of 254,695 new vehicles, down 17.8%; automotive revenue of $14.602 billion, down 13.4%; total revenue of $16.934 billion, down 9.7%; net profit of $2.269 billion, down 30.8%.

Although from these figures, Tesla planted a heel in the second quarter. But Tesla still achieved an operating margin of 14.6 percent and a positive cash position of $621 million.

Capacity also continued to creep up at the two mega-factories, with the Berlin mega-factory achieving more than 1,000 vehicles in a single week and the Austin plant producing the first vehicles with Tesla-made 4680 cells and structural battery packs, which have opened for delivery to U.S. consumers.

However, from the overall sales situation, Tesla lost its 4-year sales crown.

After experiencing different degrees of shutdown strikes suffered by the Shanghai epidemic in the second quarter, the decline in Tesla's sales in April and May on a year-over-year basis has announced the shattering of the myth shaped by Tesla in the second quarter. Not only the stock price fell 38%, from the target set by Tesla, the first half of the year has not been able to complete the delivery volume of 50% year-on-year growth target.

At this time BYD (002594) to catch up, with 641,400 units of deliveries overwhelmed Tesla's 564,000 units, the results of the first, Tesla had to give up has been reigning for 4 years of the global electric car sales championship throne.

Next, production capacity is still Tesla's top priority.

Tesla said that due to the significant increase in capacity at the end of the second quarter, the German team's 2170 battery model single-week capacity of more than 1,000 units. Capacity is also expected to continue to increase in the second half of the year. Tesla also said June was the highest production month in their history.

Looking ahead, Musk mentioned during the earnings call that the second half of the year will be amazing for Tesla. New car deliveries are still expected to grow at a rate of 50% per year.

Car price cuts, FSD price hikes

Not long ago, Musk tweeted that Tesla would consider lowering selling prices if U.S. inflation fell.

This time in Tesla's second quarter earnings call, in response to the question of whether Tesla will reduce prices, Musk said: Tesla's several price increases in a row is embarrassing, and this is not something Tesla can control. Price reduction is also a possible response under the overall macroeconomy.

Musk also expects that the overall price of the car may have fallen by the end of this year.

As for the chip issue, Tesla does not think it is necessary to have its own chip, it has already customized a large number of chips with suppliers, and in the case of global chip supply shortage, Tesla will reduce chip usage by rewriting the software, bringing together multiple functions, etc.

The shortage of raw materials lithium limits the development of the global new energy vehicle industry, Musk said, how to refine the raw materials for lithium batteries is a top priority, he called on entrepreneurs to join the lithium refining industry, Tesla side is also trying to refine lithium.

Although in the experience of several "embarrassing" price increases, Tesla gross profit in the second quarter still declined.

In this regard, Musk believes that the need for price increases is the price of FSD (Fully Self-Driving) beta software. In Musk's opinion, the current price of FSD is already very low compared to its functionality, and the price of FSD will be increased this year.

In terms of Cybertruck's progress, Musk expressed hope that Cybertruck will be delivered by the middle of next year.

China matters as it reduces bitcoin holdings

Tesla reduced its bitcoin holdings by 75 percent in the second quarter, which added $936 million in cash to its balance sheet, according to the company's earnings report.

Musk explained on the call that the bitcoin sale was an attempt to improve the funding situation, as it turns out. Bitcoin's hedging properties are not as good, but is open to increasing its holdings in the future.

In fact, Tesla's massive sell-off of bitcoin also had something to do with China. Tesla saw its first year-over-year decline in two years during the Shanghai outbreak shutdown, and after the Shanghai outbreak improved, most of Tesla's June deliveries came from the Shanghai plant. Musk said maximizing cash is important to Tesla because of uncertainty about when the epidemic in China will abate.

During the earnings call, Musk was also asked about his views on electric cars in China.

As early as the first quarterly report call in 2022, Musk expressed how much importance he attaches to the Chinese market. Because both the size of the Chinese market and the efficiency of production capacity are the most important part of whether Tesla's KPIs are met.

Previously, Musk has also been effusive in his praise of the Chinese market, previously expressing high approval of China's renewable energy and electric vehicle sectors on Twitter and Sina Weibo.

When asked the question again, Musk gave a direct statement: any (car company) that is not as competitive as Chinese companies will decline.

But in the end Musk still turned the topic to himself, arguing that Tesla China which is the best car company in China.