Tesla record-breaking quarter: the battle for electric vehicle supremacy

Tesla, the electric vehicle maker, reported fourth quarter earnings for 2022, beating on both earnings and revenue.

The company reported revenue of $24.32 billion and earnings per share of $1.19. Automotive revenue amounted to $21.3 billion in the three months ending 2022, and included $324 million of deferred revenue related to the company’s driver assistance systems.

Despite the record revenue, automotive gross margins came in at 25.9%, the lowest figure in the last five quarters.

Tesla Shares and The Q4 2022

Shares of Tesla rose more than 5% after hours as CEO Elon Musk announced that the company might be able to produce 2 million cars this year. Musk's comments came after Tesla reported adjusted earnings of $1.19 per share, beating the expected $1.13 per share according to Refinitiv.

The company also beat expectations on revenue, reporting $24.32 billion compared to the expected $24.16 billion according to Refinitiv. In the year-ago quarter, Tesla reported revenue of $17.72 billion and adjusted earnings of $2.52 per share ($0.85 adjusted for an August 2022 stock split).

Tesla reported automotive revenue of $21.3 billion in the fourth quarter, representing 33% growth year-over-year. $467 million of that came from regulatory credits in the fourth quarter of 2022, up by nearly half from the prior year in the same period.

In a shareholder deck, the company acknowledged that average sales prices have “generally been on a downward trajectory for many years,” and said “affordability” would be necessary for Tesla to grow into a company that sells multiple millions of cars annually.

In late 2022 and this year, Tesla cut prices on its cars around the world, upsetting customers in the U.S. and China who recently bought new Teslas at higher prices, and triggering an instant decline in used Tesla prices in the U.S. as well.

The Musk Vision of Tesla

CEO Elon Musk said, “Thus far in January we’ve seen the strongest orders year-to-date than ever in our history. We’re currently seeing orders of almost twice the rate of production.”

One analyst asked Musk why Tesla’s guidance for production was just 1.8 million in 2023 after the company has been ramping up production at its new factories.

Musk replied, “We’re saying 1.8 because there always seems to be some friggin’ force majeure thing that happens somewhere on Earth. We don’t control if there’s earthquakes, tsunamis, wars, pandemics, etc. If it’s a smooth year, without some big supply chain interruption or massive problem we have the potential to do 2 million cars this year. I think there would be demand for that, too.”

The company did not issue new guidance, but reiterated in its earnings release, “We are planning to grow production as quickly as possible in alignment with the 50% compound annual growth rate target we began guiding to in early 2021.”

In addition to the strong financial performance, Tesla also reported progress on its production capabilities. The company stated that it has installed the capacity to produce 100,000 Model S and X vehicles annually, and 1.8 million Model Y and Model 3 vehicles.

This includes production capacity in Shanghai, which allows Tesla to manufacture 750,000 Model 3 and Model Y electric cars annually, and factories in Austin, Texas and near Berlin, Germany, each with the capability to make 250,000 Model Y vehicles annually.

The Customers Numbers

Tesla also reported that approximately 400,000 customers in North America now have access to its experimental "FSD Beta" driver assistance system.

This system is only available to customers who purchase or subscribe to Tesla's premium driver assistance package, marketed as FSD or Full Self-Driving capability. The company recognized deferred revenue of $324 million for the quarter related to FSD, it said in a shareholder presentation.

However, it's important to note that Tesla does not make autonomous vehicles and the FSD Beta contains new software features that the company has not yet fully debugged, so it is not safe to use without a driver behind the wheel, ready to steer and brake at all times.

Finally, the company reiterated that its Cybertruck pickup is on track to start production this year in Texas, but will not reach volume production until next year.

Tesla's fourth-quarter earnings report showed strong financial performance, beating expectations on both earnings and revenue. The company also reported progress on its production capabilities, including the installation of capacity to produce 100,000 Model S and X vehicles annually, and 1.8 million Model Y and Model 3 vehicles.

Additionally, Tesla's FSD Beta driver assistance system continues to be in high demand among its customers. The company's Cybertruck pickup is also on track to start production this year, with volume production planned for next year. Overall, the report indicates that Tesla is well-positioned for continued growth in the coming years.