Tesla seeks to ease demand concerns over likely 2022 delivery target
miss
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[October 20, 2022] By
Hyunjoo Jin and Akash Sriram
(Reuters) - Tesla Inc said on Wednesday it
expected to miss its vehicle delivery target this year, but downplayed
concerns about softening demand after its revenue missed Wall Street
estimates.
Chief Executive Elon Musk told analysts on a conference call there was
excellent demand in the fourth quarter, addressing investors' concerns
that buyers could be discouraged by the weak global economy and high
prices for Tesla vehicles.
But Tesla said some logistics challenges would persist, with
fourth-quarter deliveries growing by less than 50% while production rose
50%.
"I wouldn't say we're recession proof, but it's certainly recession
resilient," Musk said.
Previously, Tesla had repeatedly said it was aiming for 50% growth this
year from the 936,172 cars it delivered in 2021.
Its shares were down nearly 6% in after-market trading.
Tesla is expanding fast despite global economic jitters, and investors
are closely watching for signs that consumer demand is cooling as
inflation surges and interest rates climb.
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"This quarter was not rainbows and roses and it leaves investors wanting
more from Tesla which is held to a higher standard than every other
automaker," Wedbush analyst Daniel Ives wrote in a client note.
"Tesla must now prove again to the Street that the robust growth story
is running into a myriad of logistics issues as opposed to demand
softening with EV competition coming all angles around the globe."
The electric carmaker's third-quarter automotive gross margin was 27.9%,
missing analysts' estimates and down from 30.5% a year earlier.
Revenue for the third quarter was $21.45 billion, a record but short of
analysts' estimates of $21.96 billion, according to IBES data from
Refinitiv.
The company said it had a negative foreign exchange impact of $250
million on its earnings as the U.S. dollar strengthened against other
major currencies.
"Raw material cost inflation impacted our profitability along with ramp
inefficiencies" from its new factories in Berlin and Texas, and the
production of its new 4680 batteries, according to Tesla's statement.
Musk added that production of the 4680 battery was gaining rapid
traction, although executive Andrew Baglino said, "There are challenges
still ahead that we have not yet surpassed. No doubt."
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![](../images/102022PIX/busine41.jpg)
A Tesla model 3 car is seen in their
showroom in Singapore October 22, 2021. REUTERS/Edgar Su
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Musk added that Tesla's Semi trucks, which would start to be
delivered to customers beginning this December, will not use the
4680 battery cells.
Musk also said the company has the ability to do a stock buyback in
the range of $5 billion to $10 billion, pending board review and
approval.
PATH TO PASS APPLE MARKET SHARE
Early this month, Tesla said it delivered 35% more vehicles in the
July-September period than in the previous quarter, thanks in part
to a rebound in China output after lengthy COVID-19 disruptions, but
the record number was shy of vehicle production and analysts'
estimates.
The electric vehicle pioneer has seen its shares tumble about 50%
from record highs last November as investors were spooked by fears
of a global economic slowdown and Musk's bid to buy social media
company Twitter.
Musk told the conference call he saw a path for Tesla to be worth
more than two mammoth companies, Apple Inc and Saudi Aramco,
combined. Tesla's market cap is now under $700 billion, while Apple
is worth $2.3 trillion and oil producer Saudi Aramco is worth $2.1
trillion.
Analysts had expected Musk to voice optimism about Tesla in the
conference call. Musk has been trying to raise cash to fund his $44
billion deal to take Twitter Inc private. Some experts say Musk may
need to sell about $3 billion more in stock after the earnings
announcement to help fund the deal.
Musk on Wednesday said he was excited about his pending acquisition
of Twitter Inc, though he said he and other investors were
overpaying for the social media company.
Musk also said Tesla's Cybertruck pick-up truck was on track to
enter production in the middle of next year and its heavy duty semi
truck could see 50,000 units in North America in 2024.
(Reporting by Akash Sriram in Bengaluru and Hyunjoo Jin and Noel
Randewich in San Francisco; Editing by Peter Henderson, Chris Reese
and Mark Potter)
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