Amid ongoing supply chain constraints, production delays in China, and increasing competition from the legacy auto industry, Tesla just reported its third-quarter earnings (PDF), in which the company said it earned $3.3 billion in net income on $21.4 billion in revenue. That represents a 56 percent increase year over year compared to $13.7 billion in revenue in Q3 2021. The company said it had a free cash flow of $8.9 billion.
The earnings report comes on the heels of a somewhat disappointing production and delivery report in which Tesla said it delivered 343,830 vehicles to customers over the past three months. That was about 20,000 less than the 364,660 vehicles that Wall Street analysts had been expecting for the quarter.
Tesla acknowledged that the rush to make as many vehicles as it can at the end of each quarter was creating a bottleneck that was making deliveries difficult to manage. “We are reaching such significant delivery volumes in the final weeks of each quarter that transportation capacity is becoming expensive and difficult to secure,” the company said in a note to shareholders. A “smoother delivery pace” will result in better cost savings, Tesla added.
“Transportation capacity is becoming expensive and difficult to secure”
Tesla says that it’s facing headwinds from the increased cost of raw materials and inefficiencies at its Gigafactory Berlin. A strengthening dollar is also impacting Tesla sales abroad, cutting into profitability. Tesla also reiterated the news that after years of waiting, it will begin Semi deliveries in December, with the first electric big rigs going into service for Pepsi.
It’s the first earnings report since Tesla’s AI Day, at which CEO Elon Musk unveiled a prototype version of a humanoid robot that he claimed will one day sell for $20,000. And it’s arriving during Musk’s controversial and chaotic acquisition of Twitter, which may or may not go through.
With the number of distractions piling up, investors are hopeful that Musk and his executive team can hit all its goals before the end of the year, including 50 percent growth year over year. But doubts, like distractions, are also accumulating.
“For Musk in the eyes of investors, patience is wearing extremely thin as the long term vision,” Wedbush analyst Dan Ives wrote in a note on Tuesday before the Q3 earnings report. “And robot talk is not what the Street cares about now in this white knuckle period of market turmoil.”
Turmoil in China is continuing to squeeze Tesla’s bottom line.
Other analysts were more blunt. “Tesla’s awful quarter is the latest sign that growing macroeconomic uncertainty is having some impact on demand for its electric vehicles,” said Jesse Cohen, senior analyst at Investing.com.
Turmoil in China is continuing to squeeze Tesla’s bottom line. Even as covid-related shutdowns became less frequent, heatwaves gripped the country, causing officials to order factories to shutter, including Tesla.
Tesla has other ways of making money beyond selling cars. The company logged $286 million in emission credit sales to other automakers this quarter, compared to $344 million in credit sales in Q2 2022. The company generates this revenue by selling these credits to automakers that make fewer “clean” vehicles than are required by the US government and the European Union. Last quarter, Tesla said it sold 75 percent of its Bitcoin, bringing in nearly $1 billion in extra revenue.
Culturally, Tesla is still very much Going Through It. Here’s an incomplete list of examples of Tesla Going Through It during the last three months:
- There were more crashes involving Autopilot and more deaths, and the company earned the distinction of most driver assist-related fatalities by the US government. Tesla was sued for misleading customers about the capabilities of its driver-assist technology.
- Cybertruck deliveries were delayed to mid-2023, and oh yeah, it’s going to be more expensive.
- The company’s head of AI is out, as well as about 200 Autopilot engineers. Tesla laid off 10 percent of its employees, including hourly workers, after Musk said he had a “super bad feeling” about the economy.
- Regulators and safety advocates (Ralph Nader!) started talking more explicitly about the dangers posed by Tesla’s Full Self-Driving driver-assist technology. Tesla fans are doing reckless stuff with it, like threatening to run over kids. Meanwhile, FSD is being used by over 150,000 people now, and it costs $15,000 to buy.
- Musk unveiled the Tesla robot, aka Optimus, at the company’s AI Day event. Robot experts were unimpressed.