Tesla Inc. fell short of the sales projection by Wall Street as they faced production and delivery bottlenecks. CEO Elon Musk assured investors that demand for EVs remained strong.
Loading the cars on trucks and ships proved to be an impediment and costly in the last quarter with maximum production output happing towards the month end. This led to difficulty in delivering the vehicles and registering higher sales figures.
Musk said demand is not faltering, and the order book is excellent for Q4. The company expects to sell every vehicle it manufactures with a great year-end pipeline.
Investors are watching closely how fast Tesla can increase its mass-market SUV model Y production from its new plants in Berlin and Austin. These two factories will be the key milestone for the EV maker. Tesla attributed missed sales targets to delivery hiccups and lower profit margins due to higher costs incurred on a slow ramp of its two new plants.
Compared to analysts’ estimates of $ 22.1 billion, Tesla reported revenue of $21.5 billion. As compiled by Bloomberg, profit rose to $1.05 a share against average analysts’ estimates of $1.01.
Tesla shares fell 5.3% to $210.28 in New York post-market trading. The stock has declined 37% in 2022 due to the slow economy, rising interest rates, inflation, and Tesla’s $44 billion bid for Twitter Inc.
Removing Delivery Bottlenecks
Tesla is working towards removing transportation bottlenecks and lower year-end costs by smoothening its logistics and delivery process. The company, however, is unlikely to achieve a 50% projected growth this year even though Chief Financial Officer Zachary Kirkhorn said production would achieve its target.
Musk said in April that it will produce 1.5 million-plus vehicles in 2022. Until the end of Q3, Tesla made 929,210 vehicles and needs to produce 5,70,000 vehicles in the last quarter to achieve its target. In the last quarter of 2021, Tesla made 305,840 vehicles.
Tesla’s projection of increasing 50% deliveries annually over multiple years remains. The company is expected to deliver its first EV delivery trucks to Pepsi in December, and musk said it is also in the final stages of production for its cybertruck.
Shares Buyback
Musk cited a growing cash reserve of $ 21.1 billion and increasing profits for buyback shares to the tune of $ 5 billion to $10 billion, subject to review and board approval.
Tesla’s market value is at $ 696 billion, and according to Musk, it could surpass the combined market capitalization of Saudi Aramco and Apple Inc., the two most valuable companies in the world now. Together, the market capitalization is $4.4 trillion, six times more than Tesla.
The gross margin of Tesla fell short of estimates of 28.4% to 27.9 % for the last quarter. Income from sales regulatory credits was $286 million, the lowest in a year.
