Tesla’s profit jumped 12% in the fourth quarter
Tesla reported a respectable jump in profit for the final quarter of 2022, but falling profit margins and slowing sales growth underscored the challenges that have weighed on the automaker’s stock.
The 12% profit increase capped a tumultuous year that included increased competition, supply chain disruptions and concerns over the behavior of its chief executive, Elon Musk. There’s no sign in Tesla’s report to shareholders on Wednesday that those issues are going away.
The year was dominated by Mr. Musk’s acquisition of Twitter, which led Tesla investors to complain that he was neglecting his duties at the automaker at a critical time.
Tesla shares have fallen 65% in 2022 as investors doubt the company is reacting with enough energy to a long list of challenges and risks.
Among other things, investors feared that Mr. Musk would sell more of his stake in Tesla to fund his acquisition of Twitter, flooding the market. They worried about Tesla’s prospects in China, the world’s biggest auto market, due to problems maintaining supplies of critical parts and growing competition from rivals like Chinese automaker BYD. In 2022, BYD overtook Tesla in the total number of electric cars sold in China.
At the same time, slowing economic growth and rising interest rates in the United States threatened to reduce the number of people who could afford a Tesla. Fourth-quarter deliveries rose 18% to 405,000 vehicles, the company said Jan. 2, much lower than Wall Street analysts had expected and below Tesla’s own targets.
“It’s been our best year ever,” Musk said on a conference call with investors on Wednesday. But he acknowledged that “2022 has been an incredibly difficult year”.
Tesla shares recouped some of their losses in January after the company cut prices for most of its electric cars in the United States and Europe to revive sales. The price of a Model 3 sedan, Tesla’s cheapest, has dropped $3,000, now selling for $44,000 in the United States before government incentives.
The markdowns appear to have prompted a surge in orders and helped reassure investors that Tesla had a plan to maintain its dominance in electric cars. Tesla faces a bigger challenge from established automakers like Hyundai, Ford Motor, General Motors and Volkswagen, which are selling more battery-powered vehicles and at lower prices than Tesla.
Although the price cuts helped promote sales, they also weighed on Tesla’s profit margin. The gross profit margin on car sales fell to 26% in the fourth quarter, from 28% in the third quarter of 2022 and 31% in the fourth quarter of 2021.
Tesla announced on Wednesday that it will begin production of its long-awaited Cybertruck by the end of the year. Delays in the truck, which was unveiled in 2019, have allowed rivals like Rivian and Ford to beat Tesla to market with electric pickup trucks.
“Having the Cybertruck on schedule is a big positive,” Garrett Nelson, senior equity analyst at CFRA Research, said in a note to clients.
Net income for the quarter was $3.7 billion, compared to $3.3 billion in the third quarter, Tesla said. For the full year, Tesla’s profit more than doubled to $12.6 billion, from $5.5 billion in 2021. Sales for the year, including revenue from solar panels and other activities, reached $81.5 billion, compared to $53.8 billion the previous year.
Tesla said it plans to produce 1.8 million cars in 2023, up from 1.4 million in 2022. That would be a more modest growth rate than in 2022, when production increased by almost 50%.
Tesla shares have risen by a third since early January, although the share price is still more than 60% below the peak it hit in November 2021.
Tesla earnings have been among the most watched numbers on Wall Street this week. It remains by far the most valuable automaker in the world and is growing much faster than more established automakers.