Tesla reported stronger-than-expected second quarter, with a record net income of $1.1 billion. It was more than twice the amount it earned in the first quarter and more than 10x its net income from the year before. It also answered an important criticism from investors who were bearish on Tesla’s stock because of its strong results.
Tesla did not rely on other automakers selling regulatory credits for its record-breaking earnings. These credits were responsible only for $354 million of the quarter’s revenue. Even though Tesla reported positive adjusted earnings in previous quarters, Tesla’s net income was dependent on the sale of credits to competitors that required them to comply with stricter environmental standards. Critics have long attacked Tesla for that, saying the company wasn’t making money actually selling cars.
Adjusted income, which investors closely monitor, rose to $1.6 billion. This is far more than analysts had predicted at $1.1 billion. It was also up from its previous record earnings on that basis of $1.1 billion in the first quarter. Forecasts of $11.3B were also exceeded by revenue of $12 billion.
Low battery and chip supply
However, Elon Musk acknowledged that the company’s growth was impeded by the shortage of computer chips which has affected all other automakers.
He stated that while we are making cars at full speed the global chip shortage situation is still very serious. “For the remainder of this year our growth rates will depend on the slowest part of our supply chain,” he said, adding that there are many chips that can serve as a brake to growth.
Musk and Tesla did offer cautious views on a few other products and plans that they had promised.
Tesla reiterated its earlier guidance, stating that it plans to construct factories in Austin, Texas and Berlin, and then begin limited production of the Model Y SUV there later in the year.
The problem is not limited to a shortage of chips. The cells required to produce the large batteries that each vehicle requires are also in short supply.
Tesla said Monday that it won’t start production of its Cybertruck pickup until after the Model Y is up and running in Texas. It also delayed plans for a semi tractor truck until 2022, “due to limited supply of battery cells” and challenges in global supply chains.
Musk stated that both Cybertruck and Semi are heavy users [of] battery capacity. We have to ensure that we have enough cell capacity for these two vehicles. Next year, we expect a huge increase in cell availability. He said, however, that the increase will not all be available by the beginning of 2022 but “will ramp up over the course of next years.”
There are several established automakers, such as Ford (F), and General Motors(GM) that are on the brink of selling their own electric pickups. This puts pressure on Tesla to bring its first pickup onto the market. According to the company, it expected “volume production” of Cybertrucks by 2022.
Musk acknowledges that the pickup’s unique design will pose a challenge for the launch.
It’s a completely new architecture. It’s going be a great product. He said that it might be “our best product ever.” But there are many fundamentally new design ideas ….. There’s so much territory yet to explore, so there will be challenges.
He tweeted recently that Tesla would open its supercharger network to other automakers in the coming year. Although he didn’t give details, he stated that the plan to lower Tesla customers’ charging costs will be implemented. He said that it was in line with Tesla’s overall mission of converting the world away from gasoline-powered cars to electric vehicles.
He stated that the goal of his organization was to promote sustainable energy. It is not to build a walled yard and then use it to bully our competitors. This is sometimes done by some companies.
Musk believes that full-auto-driving subscriptions are going to generate significant revenue beginning next year. However, it is not clear if FSD subscriptions make financial sense right now. It’s a debateable issue.
Bitcoin holdings: Small loss
In February, Tesla disclosed it used some of its cash on hand to purchase $1.5 billion in bitcoin. In April, it disclosed that it has sold some of those holdings and booked net income of $101 million from its crypto trading. The bitcoin transactions made some investors nervous, especially since the cryptocurrency has lost more than a third of its value since then. According to Dan Ives (tech investor at Wedbush Securities), some had expected that the company would report a loss of $75 million on bitcoin trading during the quarter. It reported a loss of $23 million instead.
Ives stated that “while supply chain issues are still present, it appears to have slowed down heading into the next six- to nine months.” According to Ives, the report should confirm that Tesla will sell 900,000 full-year vehicles in 2019, up from the 500,000 sold in 2020. It sold 386,000 vehicles in the first six months of the year, which is more than twice the number it sold last year.