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With Tesla aggressively cutting the retail price of its EVs in recent weeks to ward off a sustained slump in demand, analysts are gearing up to scrutinize the impact of these discounts on the EV giant’s gross margin metric – the highest in the industry.
Tesla (NASDAQ: TSLA) Q4 2022 Earnings
Tesla has reported $24.32 billion in revenue for the fourth quarter of 2022, beating consensus expectations of $23.7 billion.
Revenue Comparison
(All figures are in billions of dollars)
Tesla identified FX impact of $1.4 billion as a major challenge to its top-line metric during the quarter.
The following snippet summarizes the EV giant’s production activities during the period:
In early January 2023, Tesla disclosed that it delivered 405,278 EVs in Q4 2022, missing pared-down consensus expectations of 418,000 units. Moreover, the EV giant managed to produce 439,701 units in the pertinent quarter. For the entire FY 2022, Tesla has recorded cumulative deliveries of 1,313,851 units.
Tesla has continued to maintain over the past few quarters that it would grow its annual deliveries by 50 percent for the foreseeable future. Based on these quarterly numbers, Tesla was only able to grow its annual deliveries by 40.3 percent in 2022, thereby missing its stated guidance.
Coming back, Tesla has reported an automotive gross margin of 25.9 percent for Q4 2022, missing consensus expectations of 26.4 percent. On a sequential basis, this corresponds to a slump of around 7 percent.
Gross Margin Comparison
(All figures are in percents)
Finally, Tesla has reported $1.19 in non-GAAP (adjusted) EPS, beating consensus expectations of $1.10 per share. Bear in mind that Bloomberg has compiled a higher consensus non-GAAP EPS estimate of $1.12.
EPS Comparison
(All figures are in dollars)
The company has identified higher cost of raw materials and logistics, production ramp-up cost of 4680 cells, and negative FX impact as major challenges to its bottom-line metric during the quarter.
The following snippet summarizes Tesla’s latest guidance:
The company expects to produce 1.8 million EVs in 2023.
$TSLA 4Q earnings seem light.
- Non-GAAP EPS excl $324M of def rev recognition $1.10 vs $1.10 exp. Earnings helped by 6.9% tax rate vs 12.7% exp.
- Auto GM % ex-RC 24.3% vs 26.3% exp.
- 2023 production outlook of 1.8M +31% growth vs 2022.
- Reiterated 50% L/T production growth.— Gary Black (@garyblack00) January 25, 2023
At the time of writing, Tesla shares are up 0.5 percent in after-hours trading.
TESLA ENTERED INTO A CREDIT PACT WITH CITIBANK ON JANUARY 20TH, WHICH PROVIDES FOR REVOLVING CREDIT LINE UP TO $5B. $TSLA
— Breaking Stocks 🎢 (@BreakingStocks_) January 25, 2023
Also, Tesla has entered into a $5 billion revolving credit agreement with Citibank.
$TSLA 4Q conf call was excellent (+5% AH):
- Reiterated goal of 50% L/T prod’n growth while resetting 2023 vol expectation at 1.8M.
- Shared that Jan orders so far were 2x production capacity
- Cytruck on track for late 2023 intro
- 2023 GM% ex-RC should exceed 20% and ASP >$47K.— Gary Black (@garyblack00) January 25, 2023
Earnings Context:
$TSLA IR-compiled consensus shows lower expectations than Bloomberg ests, esp for 2023:
4Q:
- Non-GAAP EPS $1.10
- Auto GM % ex-RC 26.4%2023:
- Deliveries 1,849K (+41% YoY)
- Non-GAAP EPS ($4.01, YoY decline)
- Auto GM % ex-RC 23.8% pic.twitter.com/M3wO36H931— Gary Black (@garyblack00) January 24, 2023
While Tesla did start introducing material discounts for buyers in China in Q4 2022, the start of the new year has witnessed a veritable galore of price cuts. For instance, in the first two weeks of January, Tesla slashed the price of its EVs by as much as 20 percent in the US to allow the Model Y variants to qualify for the $7,500 federal tax credit. Similarly, the EU has witnessed a discount of up to 17 percent on some variants, while China has received another price cut of up to 14 percent.
Unnamed Tesla salespersons:
✴️post price cut, orders received in 1 day surpassed Nov orders total
✴️backend system shows orders/day record near 80K
(JIEMIAN, 12 Jan report) https://t.co/8fTzFBpyqM— Moneyball (@MoneybaII_R) January 17, 2023
Although these discounts are a major headwind for Tesla’s Q1 2023 financials, the company still maintains a healthy margin of 10 percent, or roughly $3,000, on every vehicle sold in China at these post-discount prices.
Last night’s $500 price increase on Model Y LR, combined with 80% inventory reduction on $TSLA M-Y since the price cuts, should be viewed favorably. pic.twitter.com/2MnGaS3Po5
— Gary Black (@garyblack00) January 24, 2023
Meanwhile, there are indications that the recent price cuts are re-energizing demand, as illustrated by a marked reduction in Tesla’s inventory levels in the US.
Today, we’re announcing $3.6B of new investment in Giga Nevada.
- 4M sq ft of new manufacturing footprint
- 3k additional team members
- 2 new manufacturing facilities: a 100 GWh 4680 cell factory & our first high-volume Semi factoryDetails → https://t.co/4CBOIFLwAW pic.twitter.com/rqXzyE7eRK
— Tesla (@Tesla) January 24, 2023
The EV giant recently announced that it was investing $3.6 billion to build a new plant in Nevada geared toward batteries and the production of the Tesla Semi.
NEWS: Consumer Reports has released a new report ranking 12 different driver assistance systems that they tested. Tesla ranked 7th overall.
Report: https://t.co/gJEgURnUea pic.twitter.com/XQJsffsRyL
— Sawyer Merritt (@SawyerMerritt) January 25, 2023
However, Tesla’s Autopilot continues to struggle to make headway. As an illustration, Consumer Reports has now ranked the Autopilot at an unenviable seventh place out of the twelve different Advanced Driver Assistance Systems (ADAS) that they tested.
i mean... pic.twitter.com/XyYLN1t0bn
— Dr Buck, Harvard Lecturer (@eriz35) January 20, 2023
Elon Musk also continues to face scrutiny on liquidating Tesla shares worth billions of dollars just ahead of material price cuts.
We will continue to update this article with any new material guidance provided in Tesla’s earnings call. Stay tuned.
