Fri, Jul 22, 2022 page11

• Hit by China shutdown, Tesla boosts auto prices and sells bitcoin holdings

  • AFP, NEW YORK
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  Tesla Inc reported solid quarterly earnings on Wednesday despite a hit from Shanghai’s COVID-19 lockdowns, which CEO Elon Musk said prompted the company to liquidate most of its bitcoin holdings.

  Musk, who has generated headlines over his controversial withdrawal from a US$44 billion acquisition of Twitter Inc, said the company has navigated a tricky environment with the Shanghai closure and lingering supply chain problems that have raised costs.

  The electric vehicle maker reported second-quarter profits of US$2.3 billion, about twice the same period last year, as the automaker lifted its prices to “embarrassing” levels, as Musk put it.

  

  Tesla CEO Elon Musk attends the opening of the new Tesla Gigafactory in Gruenheide, Germany, on March 22.

  Photo: Reuters

  Although Tesla’s profits topped estimates, they lagged behind first-quarter results, the first sequential profit drop since late 2020, which coincided with a fall in automotive profit margins due to rising costs.

  While revenues jumped 42 percent to US$16.9 billion, they came in below the US$17.1 billion projected by analysts.

  Musk described the period as a “unique quarter,” but told investors and analysts on a conference call that the restart of the Shanghai plant and the ramp-up of new factories in Germany and Texas create “the potential for a record-breaking second half of the year.”

  The company cited the drag from Shanghai, where its factory was shuttered for part of the quarter, but Tesla said it finished the three-month period with “a record monthly production level” after the China restart.

  Tesla said supply chain challenges remain an ongoing headache, as factory shutdowns, labor shortages, logistics and other issues “limited our ability to consistently run our factories at full capacity.”

  During the quarter, Tesla liquidated about 75 percent of its holdings in bitcoin, the value of which declined sharply this year.

  The moves on bitcoin resulted in one-time costs of US$106 million, Tesla chief financial officer Zachary Kirkhorn said.

  Musk attributed the move to the need to raise cash because of the uncertainty of when Shanghai operations would return.

  The sale “should not be taken as some verdict on bitcoin,” Musk said at the outset of the call.

  However, the cryptocurrency is a “side show to the side show” compared with the goal of accelerating the transition to green energy, Musk said, adding that the scorching heat now plaguing many countries underscores the need for change.

  Torrid demand for Musk’s electric vehicles has allowed Tesla to pass on higher prices to consumers. In the US, Tesla’s cheapest vehicle, the Model 3, starts at nearly US$50,000.

  “We’ve raised our prices quite a few times. They’re frankly at embarrassing levels,” Musk said. “We’ve also had a lot of supply chain and production shocks, and we’ve got crazy inflation.”

  “This is not a promise or anything, but I’m hopeful that at some point we can reduce the prices a little bit,” he said.

  Many Tesla watchers are bullish on the second half of this year in light of the company’s growing production profile.

  The second quarter was “especially impressive” given the headwinds of the Shanghai closure and the costs of upping production at new plants, CFRA Research analyst Garrett Nelson said.
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