DETROIT, MI — Tesla reported a record fourth-quarter net income on Wednesday, and the company predicted that additional software-related profits would keep its margins higher than any other automaker.
From October to December, the Austin, Texas-based maker of electric vehicles and solar panels earned $3.69 billion, or an adjusted $1.19 per share. According to FactSet, this outperformed analysts’ estimates of $1.13. Profit for the company increased by 59% over the same period last year.
Revenue for the quarter was $24.32 billion, which fell short of analysts’ expectations of $24.67 billion.
Even though some of Tesla’s cars had their prices cut by up to 20% earlier this month, CEO Elon Musk said that demand for Tesla products is high and that sales are limited by production.
According to some analysts, the price cuts indicate that Tesla’s sales are slowing. However, in January, Tesla saw the highest year-to-date orders in its history, Musk said during a webcast with analysts.
Tesla Plans To Make 1.8 Million Cars This Year
“We believe demand will be strong despite a likely contraction in the overall automotive market,” he said. “Demand far outnumbers supply,” Musk said, adding that Tesla is raising prices slightly.
Tesla said in a letter to investors on Wednesday that it plans to make about 1.8 million cars this year, and Musk said that sales would be higher than that number.
Tesla had said before that delivery would go up by 50% every year in most years. However, 1.8 million represents a 40% increase.
Musk stated that Tesla could produce 2 million vehicles this year. “There would be demand for that as well,” he said to analysts.
On January 13, the company cut prices in the United States and China, which are its two biggest markets. This made many analysts think that demand had dropped because prices were too high and interest rates were going up, which was true.
In a note sent to investors early on Wednesday, Adam Jonas, an analyst at Morgan Stanley, said that demand is a worry.
Decreased From 30.6% In The Quarter
“The price cuts, in our opinion, are indeed a response to slowing incremental demand relative to incremental supply,” he wrote.
Tesla’s automotive gross profit margin, defined as revenue minus cost of goods sold, decreased from 30.6% in the fourth quarter of 2021 to 25.9% in 2022 as previous discounts took effect.
Tesla stock rose slightly on Wednesday, closing at $144.43. Fh the earnings report, they rose another 5.5% in extended trading.
Seth Goldstein, a Morningstar Equity Strategist who follows Tesla, says that Musk put out the 1.8 million sales estimate to address worries about falling demand. But he thinks that the price cuts will make Tesla’s profit margins shrink even more this year.
“In the long run, I believe profit margins will recover,” he predicted.
Goldstein said that despite price cuts in China, average sales prices rose in the fourth quarter, and the company was able to increase productivity at new factories in Texas and Germany. However, he claimed more was needed to offset higher raw material and shipping costs.
Software Had Reached About 400,000 Users
Tesla also said that its “Full Self-Driving” software had reached about 400,000 users and brought in $324 million in revenue during the quarter. Full Self-Driving can’t drive itself, despite the name. Tesla tells drivers to be ready to take over at any time.
The company said that there are worries about the economy as a whole because interest rates are going up. “In the near term, we are accelerating our cost-cutting roadmap and driving toward higher production rates while remaining focused on executing against the next phase of our roadmap,” according to the letter.
Musk was asked how Tesla would mitigate brand damage following his $44 billion takeover of Twitter, based on Morning Consult poll results showing a steep decline in Democratic favorability.
On the other hand, Musk claims to have 127 million followers on the social media platform, and his following is growing. “That implies that I’m fairly popular,” he said, adding that the number of followers speaks for itself.
Tesla earned $12.56 billion in net income for the fiscal year or an adjusted $4.07 per share.
Last year, the company’s stock dropped 65% on concerns that Musk was distracted by his $44 billion acquisition of Twitter. However, they are up about 35% so far this year.
Price cuts that began on January 13 fueled Wall Street concerns that demand for Teslas was dwindling as intense competition from startups and legacy automakers arrived.
SOURCE – (AP)
