Tesla logs record profit in fourth quarter, warns of uncertainties

Tesla on Wednesday posted record net income in the fourth quarter of last year, and the company predicted that additional software-related profits will keep its margins higher than any other automaker.

Tesla, maker of electric vehicles and solar panels said it made $3.69 billion from October through December, or an adjusted $1.19 per share.

That beat estimates of $1.13 that had been reduced by analysts, according to FactSet.

The company’s profit was 59 per cent more than the same period a year ago.

Revenue for the quarter was $24.32 billion, which fell short of the $24.67 billion that analysts expected.

But the company’s automotive gross profit margin, which is revenue minus cost of goods sold, fell from 30.6 per cent in the fourth quarter of 2021 to 25.9 per cent in the same period in 2022.

CEO Elon Musk told analysts on a webcast that the results came during a challenging year with “massive difficulties” including plant shutdowns and supply chain issues.

On January 13, the company cut prices in the US and China, its two biggest markets, by up to 20 per cent on some models, leading many analysts to believe that demand had fallen due to high prices and rising interest rates.

But Musk said demand is strong, and so far in January the company has seen the strongest orders year-to-date in Tesla history.

“We think demand will be good despite probably a contraction in the automotive market as a whole,” he said.

“Demand far exceeds production,” Musk said, adding that Tesla is making small price increases.

Tesla said in its investor letter Wednesday that it would produce about 1.8 million vehicles this year, ahead of a predicted 50 per cent annual growth rate. But the outlook section of the letter didn't give an estimate of deliveries for the year.

EV Competition for Tesla

Tesla biggest competitor is likely to be a Chinese company, Chief Executive Officer Elon Musk said on a call with analysts following the electric-vehicle maker’s quarterly earnings. 

Asked about Chinese car companies, Musk said they “work the hardest, and they work the smartest,” describing them as the most competitive in the world. “If I were to guess,” he said, “probably some company out of China is the most likely to be second to Tesla.”  

Tesla slashed prices on its models in China, where it has a factory in Shanghai, on Jan. 6 following an earlier round of cuts on Chinese-made Model Y and Model 3 EVs in October. Other automakers have also announced cuts to get a better hold in the world’s biggest EV market, including local players such as Xpeng Inc. and Aito, which is backed by Huawei Technologies Co. 

China’s leading EV maker is BYD Co., which outsold Tesla in 2022 when its plug-in hybrid vehicles as well as pure EVs were included.  

Musk said on Wednesday’s call that China is the most competitive market. He’s made similar comments before, including during an online forum in September 2021, when he said he had “a great deal of respect for the many Chinese automakers.”

Tesla made more than 710,000 EVs in China last year, about 52% of its global output, even with production being disrupted by the country’s now-abandoned Covid-Zero policy. Musk said 2022 was difficult due to shutdowns at Tesla’s China factory, along with higher borrowing costs and logistical issues.