Tesla cautions factory openings won't be simple, posts record earnings

Asia's Tech News Daily

By Hyunjoo Jin and Subrat Patnaik

© Reuters/Stephen Lam FILE PHOTO: Tesla’s primary vehicle factory reopens in Fremont

(Reuters) – Tesla Inc said on Wednesday its upcoming factories and supply-chain headwinds would put pressure on its margins after it beat Wall Street expectations for third-quarter revenue on the back of record deliveries.

The world’s most valuable automaker has weathered the pandemic and the global supply-chain crisis better than rivals, posting record revenue for the fifth consecutive quarter in the July to September period, fueled by a production ramp-up at its Chinese factory.

Led by billionaire Elon Musk, Tesla faces challenges of maintaining its earnings growth in the face of a prolonged chip shortage and with its factories starting production in Berlin and Texas this year.

“There’s quite an execution journey ahead of us,” Chief Financial Officer Zachary Kirkhorn said, referring to its plan to launch production at new German and Texas factories.

“There are a number of unknown unknowns that we need to work through,” he added. “We are kind of also in this uncertain environment with respect to cost structure,” he said, referring to price fluctuations of raw materials such as nickel and aluminum.

Musk himself was not present on the quarterly earnings call for the first time.

Tesla said it aims to increase production in the fourth quarter from the previous quarter, adding that “the magnitude of growth will be determined largely by outside factors.”

Tesla shares, up about 23% this year, were down about 0.6% in extended trade late on Wednesday.

Third-quarter Revenue rose to $13.76 billion from $8.77 billion a year earlier. Analysts had expected revenue of about $13.63 billion, according to IBES data from Refinitiv.

Tesla’s automotive gross margin, excluding environmental credits, rose to 28.8%, from 25.8% the previous quarter.

Tesla’s overall average price fell as it sold more lower-priced Model 3 and Model Y cars, but it raised prices some in the United States.

“Tesla’s average selling price (ASP) of vehicles were higher than expected and the U.S. market drove that,” said Gene Munster, managing partner at venture capital firm Loup Ventures, an investor in Tesla.

Tesla has cut costs with the use of more Chinese parts including batteries. The company posted robust sales in China, where its Shanghai factory has surpassed the Tesla factory in Fremont, California, in terms of production.

“We think this also reflects mix, with its lower-cost China factory accounting for a greater percentage of overall production and the Fremont, California, factory accounting for a decreasing share,” said Garrett Nelson, senior equity analyst at CFRA Research.

In the third quarter, Tesla posted $279 million in revenue from sales of environmental credits, the lowest level in nearly two years. The electric car maker sells its excess environmental credits to other automakers that are trying to comply with regulations in California and elsewhere.

Tesla deliveries rise for the sixth consecutive quarter https://graphics.reuters.com/TESLA-RESULTS/zdpxorxbgvx/chart.png

(Reporting by Hyunjoo Jin in San Francisco and Subrat Patnaik in Bengaluru; Editing by Maju Samuel, Peter Henderson and Matthew Lewis)

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