Factors such as an extended shutdown at its Shanghai assembly plant, an economic downturn, supply chain disruptions, labour shortage, and a difficult quarter broke Tesla’s streak of quarterly profits in the second quarter of the year. In its financial results and shareholders letter for Q2 2022, the automobile company reported its first sequential decline in quarterly profits in over a year.
Nonetheless, it still managed to overcome all obstacles and emerge as profitable while beating market estimations. The company clocked earnings per share (EPS) at $2.27, exceeding the estimated $1.81, while its revenue for the quarter successfully beat Wall Street’s estimate of $16.52 billion to come to $16.93 billion. The revenue is also a year-over-year increase of 42%, driven by more vehicle deliveries, increased average selling price (ASP), and growth in other parts of Tesla’s business.
Its operating cash flow for the quarter came at $621 million in Q2 2022, while its cash and cash equivalents for the quarter rose to $18.3 billion. Its operating and net incomes amounted to $2.5 billion GAAP and $2.3 billion GAAP respectively, while the total gross profit reached $4.2 billion for the quarter.
Its automotive gross margin fell by 5% quarter-over-quarter (for the first time in a long time), while automotive revenues made up $14.6 billion of the total revenue. Tesla’s shares, which have fallen by around 30% this year, rallied after the earnings report was released to close at $742.50 on Wednesday.
Speaking of automobiles, the company managed to produce 258,580 vehicles in the quarter, a year-over-year increase of 25% but still lesser than the 305,407 vehicles it produced in Q1. The productions consisted of 16,411 Model S and Model X vehicles and 242,169 Model 3 and Model Y vehicles.
As for deliveries, the number increased by 27% year-over-year to reach 254,695 in the previous quarter, which is far lesser than the 310, 048 vehicles it delivered in the first quarter. It delivered 16,162 Model S and Model X vehicles and 238,533 Model 3 and Model Y vehicles.
In an earnings call, Tesla CEO Elon Musk (who’s having his own share of troubles over Twitter) said that Tesla’s new Berlin gigafactory had managed to produce over 1000 vehicles per week (even though it is a “gigantic money furnace”) and expected the same from its Texas factory. Its factory in Fremont is said to have produced a record number in Q2 2022 as well.
“In spite of all these challenges, it was one of the strongest quarters in our history,” Musk said on the earnings call. “It’s been kind of supply-chain hell for several years,” he added.
“We continued to make significant progress across the business during the second quarter of 2022. Though we faced certain challenges, including limited production and shutdowns in Shanghai for the majority of the quarter, we achieved an operating margin among the highest in the industry of 14.6%, a positive free cash flow of $621M, and ended the quarter with the highest vehicle production month in our history,” the company said in its earnings report.
Going forward, Tesla intends to grow its manufacturing capacity “as quickly as possible.”
In what is a surprising bit of news, Tesla divested itself of 75% of its Bitcoin holdings, converting it into fiat currency instead, to add $936 million to its balance sheet. This leaves it with $218 million worth of digital assets.
It is surprising only because Musk has been an avid supporter of Bitcoin and cryptocurrencies in general – his actions and statements have often heavily influenced the price of Bitcoin. The world’s richest man said that Tesla was “concerned about overall liquidity of the company given shutdowns in China,” adding that Tesla is open to increasing its bitcoin holdings in the future.
In hindsight, the move by Tesla is understandable. It comes at a time when the crypto market is in shambles and the prices of cryptos continue to take a hit and tumble. Tesla, for its part, has been fond of cryptos, as is evident from instances such as purchasing $1.5 billion worth of Bitcoin last year and accepting the crypto as payment for a little while.