July 21 (Reuters) – Tesla (TSLA.O) A smaller-than-expected drop in quarterly profit on Wednesday was helped by a series of price hikes for its cars, which Elon Musk later said were “embarrassingly high” and could hurt demand.
According to analysts, Tesla sold most of its bitcoins, leading to smaller-than-expected impairment charges from the cryptocurrency’s decline in value.
CEO Elon Musk flip-flopped in a post-earnings conference call, initially saying macroeconomic uncertainty could have some impact on demand for its electric cars, but when pressed for details by an analyst, the company said it did not have a demand problem. but production problem.
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He said, “You can’t raise prices arbitrarily high, because if you cross the breakeven point and then demand falls off a cliff.”
“(Prices) are obviously at embarrassing levels. But we’ve also had a lot of supply chain and production disruptions and runaway inflation,” he said. read more
Tesla has raised prices several times in the past year. For example, the US price of the long-range Model Y is $65,990, up more than 30% from the start of 2021.
Musk said he expects inflation to begin to decline by the end of the year and most commodity prices to stabilize, which he hopes will allow Tesla to cut prices somewhat.
Shares of Tesla rose 1.7% in premarket trading on Thursday. Shares are down nearly 40% from their peak in November.
Chief Financial Officer Zachary Kirkhorn said Tesla is still on track to achieve a 50% increase in deliveries this year, adding that while the target has become more difficult, it “remains possible with strong execution.”
Tesla’s China factory ended the second quarter with a record monthly production level after being forced to shut down due to COVID-19-related lockdowns.
The new factories in Berlin and Texas aim to produce 5,000 cars per week by the end of the year, Musk said, adding that Berlin produced 1,000 cars per week in June. He previously said the new factories were “huge moneymakers”. read more
Analysts at Morgan Stanley said in a report after Tesla announced earnings that they see “near-term margin headwinds, particularly due to (new) challenges with ramping up new production in Berlin.”
Tesla executives acknowledged some ongoing supply constraints for older-generation microchips, but said there were no major issues barring unexpected COVID-related disruptions in chip and battery supply.
The EV maker posted second-quarter adjusted earnings of $2.27 per share in June, versus analysts’ consensus estimates of $1.81.
The car’s gross margin fell to 27.9% from a year ago and the previous quarter.
Total revenue fell to $16.93 billion from $18.76 billion in the previous quarter, ending a streak of record revenue in recent quarters. Analysts had expected $17.10 billion, according to Refinitiv. read more
CASH FROM BITCOIN
Tesla said it converted about 75% of its bitcoin purchases into fiat currency, adding $936 million in cash to its balance sheet.
Musk said the sale was made to boost liquidity at a time when Tesla is uncertain how long China’s COVID-19 lockdown will last. Tesla has not sold any of its Dogecoin cryptocurrency holdings.
“This shouldn’t be taken as some judgment on bitcoin,” he said, adding that Tesla is open to increasing its cryptocurrency holdings in the future.
Musk announced in May last year that Tesla would not sell its bitcoin.
“Bitcoin losses highlight an important part of Tesla’s investment case — its eccentric owner. While Musk’s impressive innovation has served the company well, his personal talent is starting to raise management questions,” said Laura Hoy, an analyst at Hargreaves Lansdown.
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Reporting by Hyunjoo Jin in San Francisco and Nivedita Balu in Bengaluru; Edited by Anil D’Silva, Peter Henderson, Matthew Lewis, Leslie Adler, and Himani Sarkar
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