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Tesla Q2 profit falls from Q1, but is stronger than expected

DETROIT (AP) – Tesla’s second-quarter (Q2)profit fell 32 per cent from record levels in the first quarter as supply chain issues and pandemic lockdowns in China slowed production of its electric vehicles.

But the Austin, Texas, company still surprised analysts on Wednesday with a better-than-expected USD2.26 billion net profit for the quarter.

Tesla stuck with a prediction of 50 per cent annual vehicle sales growth over the next few years, but said that depends on the supply chain, equipment capacity and other issues.

The company made a record USD3.32 billion in this year’s first quarter.

Tesla’s sales from April through June fell to 254,000 vehicles, their lowest quarterly level since last fall. But the company predicted record-breaking production in the second half and said that in June it had the highest production month in its history.

Industry analysts had been expecting lower earnings after the lower sales figures and tweets by CEO Elon Musk about laying off 10 per cent of the company’s work force due to fears of a recession.

In an interview, Musk described new factories in Austin and Berlin as “money furnaces” that were losing billions of dollars because supply chain breakdowns were limiting the number of cars they can produce.

A sign bearing the company logo outside a Tesla store in Cherry Creek Mall in Denver. PHOTO: AP

But Tesla exceeded Wall Street expectations from April through June with adjusted earnings of USD2.27 per share. Analysts polled by FactSet expected USD1.81. Revenue was USD16.93 billion, beating estimates of USD16.54 billion.

Edward Jones analyst Jeff Windau said the earnings were better than expected. He noted that the decrease in automobile revenues from the first quarter was offset by stronger energy storage, solar and services performance.

Musk reiterated the 50-per-cent annual vehicle sales growth forecast but said it depends a lot on circumstances that the company might not be able to control.

Windau said the forecast “shows the confidence they have in their ability to grow the electric vehicle market”.

Tesla shares rose 1.5 per cent to USD753.40 in extended trading on Wednesday. The company said it converted 75 per cent of its bitcoin investment to government currency during the quarter, adding USD936 million in cash to its balance sheet. It spent USD1.5 billion on the investment last year. Overall, it booked a USD106 million cost for bitcoin, plus added costs for employee reductions.

CEO Elon Musk said the bitcoin holdings were sold to raise cash because of uncertainty over how long pandemic lockdowns would last in China. He said Tesla is open to increasing bitcoin holdings in the future.

The price of bitcoin has fallen about 50 per cent so far this year.

Musk also said Tesla is seeing indications that inflation may be declining as prices for most commodities drop. He cautioned against making economic predictions but said commodity prices, such as steel and aluminum, are trending down.

Musk said Tesla’s ‘Full Self-Driving’ beta test software is on track to be released before the end of this year to all North American customers who want to buy it. And with regulatory approval, it will be released in Europe and other parts of the world, he said.