Elon Musk's Tesla races ahead of rising costs with price hikes

Tesla has been an outlier since the pandemic outbreak, posting record deliveries and earnings for several quarters when rivals wrestling with global supply chain snarls rolled out production halts. — Reuters pic
Tesla has been an outlier since the pandemic outbreak, posting record deliveries and earnings for several quarters when rivals wrestling with global supply chain snarls rolled out production halts. — Reuters pic

SAN FRANCISCO, April 21 ― Tesla Inc results surged past Wall Street expectations yesterday, as higher prices helped insulate the electric vehicle maker from supply chain chaos and rising costs.

Tesla has been an outlier since the pandemic outbreak, posting record deliveries and earnings for several quarters when rivals wrestling with global supply chain snarls rolled out production halts.

Shares of Tesla rose 5 per cent after the close of regular trading.

On an investor conference call, CEO Elon Musk said Tesla has a reasonable shot at achieving 60% vehicle delivery growth this year and remains confident of seeing 50 per cent annual delivery growth for several years.

Tesla raised its prices in China, the United States and other countries, after Musk said in March the US electric carmaker was facing significant inflationary pressure in raw materials and logistics amid the crisis in Ukraine.

“Our own factories have been running below capacity for several quarters as supply chain became the main limiting factor, which is likely to continue through the rest of 2022,” Tesla said in a statement.

The price increases are designed to cover higher costs for the next six to 12 months, which protects Tesla on orders for cars that it may not deliver for a year.

“Price increases are nicely exceeding cost inflation,” said Craig Irwin at Roth Capital.

“Chinese production issues seem well managed, and we expect Austin and Berlin to make up the slack from Shanghai’s 19-day outage.”

Tesla’s strong quarterly report allowed Musk, already the world’s richest man, to meet a hat trick of performance goals worth a combined US$23 billion (RM98.5 billion) in new compensation. He receives no salary and his pay package requires Tesla’s market capitalisation and financial growth to hit a series of escalating targets.

The world’s most valuable automaker said revenue was US$18.8 billion in the first quarter ended March 31, versus estimates of US$17.8 billion, according to IBES data from Refinitiv. This is up 81 per cent from a year earlier.

Revenue from sales of its regulatory credits to other automakers jumped 31 per cent to US$679 million in the first quarter from a year earlier, helping boost revenue and profits.

Its earnings per share was US$3.22, beatings analysts’ estimates of US$2.26.

Tesla’s pre-tax profit (EBITDA) per vehicle delivered rose by more than 60 per cent to US$16,203 in the latest quarter compared with a year earlier.

Tesla shut down its Chinese factory for about three weeks before resuming production gradually this week. “Although limited production has recently restarted, we continue to monitor the situation closely,” Tesla said yesterday.

Tesla, which does not advertise its products, said its vehicle orders spiked on the day after Super Bowl games during which other automakers aired a number of commercials about their electric vehicles. For example, Leonardo DiCaprio-backed Polestar’s ad took a potshot at Tesla and Volkswagen.

On an investor conference call, Musk said Tesla expects to mass produce a robotaxi with no steering wheel or pedal by 2024.

During the call, Musk did not mention Twitter, which he offered to buy last week for US$43 billion. Investors are concerned that he may sell some Tesla stocks or borrow against additional Tesla shares to finance his bid.

Investors also worry about Musk being distracted by his Twitter bid at a time when Tesla is ramping up production at new factories in Berlin and Texas.

“Factory ramps take time, and Gigafactory Austin and Gigafactory Berlin-Brandenburg will be no different,” Tesla said in a statement.

The new factories will be key to meeting demand and reducing reliance on its China factory, its biggest one, which is slowly recovering from a plant shutdown. ― Reuters