Tesla posts record profits for the final quarter of 2022, but braces for more competition ahead

Tesla on Wednesday posted record net income in the fourth quarter of last year as it predicted that additional software-related profits will keep its margins higher than any other automaker.

The Austin, Texas, maker of electric vehicles and solar panels said it posted $3.69 billion in profit from October to December, beating analysts’ predictions. The company’s profit was 59% higher than that of the same period of the previous year.

Revenue for the quarter was $24.32 billion, below the $24.67 billion analysts had expected.

“While every quarter is important for Tesla, we would single out this one… as one of the most important moments in Tesla’s history and for Musk himself,” Wedbush Securities analyst Dan Ives said of the long-awaited call from Profits.

“After experiencing unprecedented hypergrowth in recent years in the electric vehicle market, which was essentially created by Musk, Tesla now faces a darker macro in 2023 with fierce competition coming from all angles,” Ives said. Adding to that backdrop is Musk, who has essentially gone from a red-caped superhero to a villain in the eyes of many investors after the ongoing Twitter fiasco has cast a dark shadow over Tesla stock. he added.

price cuts

On January 13, the company cut prices in the US and China, its two largest markets, by as much as 20% on some models, leading many analysts to believe that demand had fallen due to high prices, rising interest rates and competition from other electric vehicle manufacturers.

Tesla said in its letter to investors on Wednesday that it would produce about 1.8 million vehicles this year, above the projected annual growth rate of 50%. But the outlook section of the letter did not give an estimate for deliveries for the year. Tesla previously said that its deliveries would grow at an annual rate of 50% most years.

Morgan Stanley analyst Adam Jonas wrote in a note to investors Wednesday morning that demand is a problem for the company. “In our view, the price cuts are in fact a response to the slowdown in incremental demand relative to incremental supply,” he wrote.

“Full self-driving” software

Tesla also said it has released its “Full Self-Driving” software to about 400,000 users, and that it recognized $324 million of Full Self-Driving software during the quarter. Despite its name, “Full Self-Driving” cannot drive itself, and Tesla warns drivers to be ready to intervene at any time.

The company said it knows there are doubts about the macroeconomy in the face of rising interest rates. “In the near term, we are accelerating our cost reduction roadmap and moving towards higher production rates, while staying focused on executing the next phase of our roadmap,” the letter said.

Tesla shares rose as much as 3% in after-hours trading, signaling a positive investor response to the results.

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