Tesla, the Austin, Texas-based electric vehicle and solar panel manufacturer, has posted record net income in Q4 of 2022, and has predicted that additional software-related profits will keep its margins higher than any other automaker. The company earned $3.69 billion from October through December, or an adjusted $1.19 per share, beating estimates of $1.13 that had been reduced by analysts according to FactSet. The company’s profit was 59% more than the same period a year ago. However, revenue for the quarter was $24.32 billion, which fell slightly short of the $24.67 billion that analysts expected.
CEO Elon Musk stated that despite price cuts of up to 20% on some of its vehicles announced earlier this month, demand for Tesla products is strong and sales are constrained by production. Some analysts have said the price cuts were a sign Tesla’s sales are softening. However, so far in January, Tesla has seen the strongest orders year-to-date in its history, Musk said on a webcast with analysts.
Tesla said in its investor letter that it would produce about 1.8 million vehicles this year, and Musk predicted that sales would also hit that number. Previously, Tesla has said its deliveries would grow at a 50% annual rate most years. But 1.8 million would be about a 40% growth rate. Musk said it’s possible Tesla could build 2 million vehicles this year. “There would be demand for that, too,” he told analysts.
On January 13, the company cut prices in the US and China, its two biggest markets, leading many analysts to believe that demand had fallen due to high prices and rising interest rates. However, Morgan Stanley analyst Adam Jonas wrote in a note to investors that demand is a problem. “In our view, the price cuts are indeed a response to slowing incremental demand relative to incremental supply,” he wrote.
Tesla’s automotive gross profit margin fell from 30.6% in Q4 of 2021 to 25.9% in the same period in 2022 as previous discounts took hold. However, the company also said it has rolled out its “Full Self-Driving” software to about 400,000 users and that it recognized $324 million in revenue from “Full Self-Driving” software during the quarter.
In conclusion, Tesla has posted record net income in Q4 of 2022, and despite concerns of slowing demand, CEO Elon Musk stated that demand for Tesla products is strong and sales are constrained by production. The company has also predicted that additional software-related profits will keep its margins higher than any other automaker.
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