Tesla Earnings Surpass Expectations Of Analysts Amid Supply Chain Problems

Electric Vehicle maker Tesla reported better-than-expected earnings for the fourth quarter of 2021 amid supply chain problems that the company described as a limiting factor.

The company reported earnings of $2.52 per share, adjusted, surpassing a consensus of $2.36 per share, according to Refinitiv. Revenue, on the other hand, stood at $17.72 billion, surpassing an estimate of $16.57 billion that analysts expected, according to Refinitiv.

Tesla’s shares plummeted as much as 5 percent in extended trading after mentioning that the supply chain issues currently hovering in the tech industry could continue throughout 2022. The stock later went up after the brief fall.

According to the company’s statement, Tesla’s revenue soared 65 percent YoY with automotive revenue totalling $15.97 billion, up 71 percent. The statement added that “2021 was a breakthrough year for Tesla. There should no longer be doubt about the viability and profitability of electric vehicles. With our deliveries up 87% in 2021, we achieved the highest quarterly operating margin among all volume OEMs, based on the latest available data, demonstrating that EVs can be more profitable than combustion engine vehicles. Additionally, we generated $5.5B of GAAP net income and $5.0B of free cash flow in 2021 – after spending $6.5B to build out new factories and on other capital expenditures”.

Revenue for energy generation and storage was down 8 percent at $688 million, falling below a consensus of $815.1 million by analysts polled by StreetAccount. It is pertinent to know that this is the lowest revenue for the category since the first quarter of 2021.

Net income which stood at $2.32 billion was up 760 percent with the company adding that it saw a 27.4 percent gross margin. The last quarter had a gross margin of 26.6 percent.

Like other companies, supply chain problems was a limitation for the company in the quarter “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 2022”, the company mentioned in a shareholder deck.

Tesla’s boss Elon Musk said that Tesla expects to be limited in the supply of chips this year and that the company would not be producing new models of vehicles this year as a result of chip shortage complications. “We will not be introducing new vehicle models this year. We will still be parts constrained”, he said adding that the company would instead work on engineering and tooling to create those future vehicles.

The company’s long-delayed heavy-duty Semi truck and experimental Cybertruck pickup have been an area of concern for shareholders who have been waiting for feedback on the progress of these projects. Elon Musk, who had announced quite a long list of ambitions at a Tesla Battery Day presentation held in 2020 said that Tesla is currently not working on a $25,000 compact electric vehicle.

In November, the billionaire tweeted “Oh man, this year has been such a supply chain nightmare & it’s not over! I will provide an updated product roadmap on next earnings call”, seemingly frustrated about the supply chain issue.

Irrespective of the supply chain issue, the company has been making progress. The CEO mentioned that Tesla had been producing a few cars in Austin and Berlin in late 2021 noting that “In Texas, we’re building Model Ys with the structural battery pack and the 4680 cells. We will start delivering after final certification of the vehicle which should be fairly soon”.

Tesla noted that its first US factory in Fremont, California, achieved record production in 2021, adding that it aims to expand the facility’s capacity beyond 60,000 cars annually. The company also said that it has expanded its experimental driver assistance systems testing program called FSD Beta to around 60,000 users in the US. “Full Self-Driving (FSD) software remains one of our primary areas of focus. Over time, our software-related profit should accelerate our overall profitability”, the company wrote in its statement.

Tesla has also opened a dealership in China’s most controversial city of Xinjiang in the fourth quarter of 2021.

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