Tesla Posts Record Profit Despite Slashing Prices Amid Waning Demand

Tesla CEO Elon Musk speaks during the official opening of the new Tesla electric car manufacturing plant near Gruenheide, Germany, on March 22, 2022. (Christian Marquardt - Pool/Getty Images)

Tesla posted record profits and revenues for 2022, despite slashing prices on a number of its electric vehicles in a bid to bolster sales as the auto industry faces waning demand.

The electric vehicle maker posted (pdf) $24.32 billion in revenue for the fourth quarter ended Dec. 31, up 37 percent year-over-year from $17.7 billion in the same period in 2021. Wall Street analysts had expected average revenue of $24.16.

Net profit for the quarter was $3.69 billion, or adjusted earnings of $1.19 a share, beating the $1.12 a share average estimate of analysts compiled by Bloomberg.

According to a Jan. 2 Tesla press release, the company produced over 439,000 vehicles and delivered over 405,000 vehicles in the fourth quarter up from the last quarter, although still missing out on analysts’ estimates.

Meanwhile, vehicle deliveries grew 40 percent year-on-year to 1.31 million and production annually increased 47 percent to 1.37 million last year.

Musk has previously said he wants to sell 20 million cars annually by 2030.

‘Another Record-Breaking Quarter’

For the full year of 2022, total revenues rose to $81.5 billion, up 51 percent from the $53.8 billion the previous year, while net income soared 128 percent to $12.5 billion from $5.5 billion in 2021.

The fourth quarter of 2022 was “another record-breaking quarter and 2022 was another record-breaking year,” the company said. “In the last quarter, we achieved the highest-ever quarterly revenue, operating income, and net income in our history.”

The EV maker reported automotive revenues in the fourth quarter of $21.3 billion, up 33 percent from almost $16 billion year-on-year, while they rose 51 percent to $71.5 billion in 2022 from $47.2 billion in 2021.

Approximately $467 million of the $21.3 billion automotive revenues in the fourth quarter came from government-issued regulatory credits, which are used by other automakers to meet greenhouse gas emissions regulations, up by nearly half from the prior year in the same period.

For the full year of 2022, the automaker generated over $12 billion in net income and is now sitting on more than $22 billion.

Additionally, Tesla said it expects that additional software-related profits will keep its margins higher compared to its competitors.

Shares rose more than 4 percent after hours on Wednesday and were up more than 30 percent since the start of the year after Elon Musk said the company might be able to produce nearly 2 million, or approximately 1.8 million cars in 2023, although the company stopped short of providing exact estimate deliveries for this year.

Musk Says Tesla Seeing Strong Demand

The better-than-expected results come as Tesla earlier this month drastically slashed the prices of its vehicles in China by more than 10 percent, marking the second time it has done so in less than three months.

Musk’s company cut prices on its Model 3 and Model Y EVs in China by between $4,220 and $5,240 after it cut costs by up to 9 percent on the Model 3 and Model Y in October 2022 in an effort to boost sales.

Morgan Stanley analyst Adam Jonas wrote in a note to investors early Wednesday that Tesla is facing problems with demand.

“In our view, the price cuts are indeed a response to slowing incremental demand relative to incremental supply,” he wrote.

Musk told investors on a call on Wednesday that 2020 had been an incredibly challenging year, citing increased interest rates, shutdowns, and delivery challenges.

However, he noted: “The most common question we’ve been getting from investors is about demand. I want to put that concern to rest. Thus far in January, we’ve seen the strongest orders here today then ever in our history, we currently are seeing orders at almost twice the rate of production.”

“It’s hard to say whether that will continue at twice the rate of production,” he continued. “Orders are high and we’ve actually raised the Model Y price up a little bit in response to that. We think demand will be good despite, probably, a contraction in the automotive market as a whole.”