Tesla's profits jumped in the first quarter but challenges loom

Tesla said Wednesday it made $3.3 billion in profit in the first three months of the year, up from $438 million a year earlier and the biggest quarterly profit since the company was founded. But Tesla also said it expects its factories to operate below capacity for the rest of 2022.

The electric car maker said its first-quarter revenue was $18.8 billion, up from $10.4 billion a year earlier. The profit far exceeded investors’ expectations.

Tesla was the fastest-growing major automaker last year, nearly doubling sales to nearly a million vehicles as the industry as a whole slumped. New factories nearby Austin, TXand Berlin is positioning the company to repeat that growth this year – if it can overcome serious challenges.

These include a shortage of semiconductors that has plagued automakers for more than a year. Tesla also had to close its factory in Shanghai because of China’s draconian attempts to contain the coronavirus. China accounted for a quarter of Tesla’s sales last year, and the Shanghai plant also exports cars to other countries in Asia and Europe.

Tesla said on Wednesday it had resumed “limited production” in Shanghai after a three-week shutdown. But he warned he continued to face “persistent” supply chain issues as well as rising raw material costs.

“Our own factories have been operating below capacity for several quarters as the supply chain has become the primary limiting factor, which is expected to continue through the end of 2022,” Tesla said in a statement.

Tesla Chief Executive Elon Musk said on a conference call with investors and analysts on Wednesday that his “best estimate” was that Tesla would produce 1.5 million cars this year, hitting the target of company to achieve sales growth of 50% per year.

Analysts worry that supply chain and production issues, which Tesla was better at avoiding last year than other automakers, could hamper the company’s growth this year.

“A robust demand story for Tesla is overshadowed by brutal production issues in China as well as a Rubik’s cube supply chain, which continues to haunt Tesla as well as the rest of the auto/tech industry,” said Wedbush Securities analysts in a statement. note to customers ahead of Tesla’s first quarter earnings announcement.

Musk said soaring lithium prices are forcing the company to raise prices, potentially slowing the rate at which people switch to electric vehicles. Some lithium producers enjoy profit margins of 90%, he added.

“Can more people get into the lithium business please?” he said. “Do you like minting money? Then the lithium sector is for you.

Mr. Musk hinted that Tesla could get more involved in the raw materials supply chain, but did not say whether it would expand directly into mining metals like lithium. “We look at all the raw materials and look carefully,” he said. “We believe we will have some exciting announcements in the months to come.”

Tesla remains by far the largest maker of battery-powered cars. In the first three months of 2022, it sold 310,000 vehicles, an increase of almost 70% over the previous year. But mainstream automakers like Volkswagen, Ford Motor and Hyundai Motor have woken up to the threat and started selling models that challenge Tesla’s dominance.

There is also a risk that Mr Musk could alienate some car buyers with his high-profile takeover bid. Twitter. Some potential clients may applaud Mr. Musk as a champion of free speech, but others may worry that he is opening up Twitter to hate speech and misinformation.

Mr. Musk did not discuss and was not asked about his plan to acquire Twitter during the call.

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