It was a record quarter for Tesla — and after reporting both all-time high production and delivery numbers, the question investors will expect to have answered today is just how much of a record the California EV maker will deliver in terms of revenues and earnings.
Wall Street is primed for solid results, Tesla forecast to come in with a $600 million profit — six times more than it reported for the April-June quarter last year. Sales and revenues, meanwhile, were expected to reach $11.4 billion, according to a consensus of industry analysts posted by FactSet.
The automaker’s solid results are expected to run counter to what other domestic — and many foreign — companies experienced during the period. The industry, as a whole has faced a mixed good news/bad news scenario this year. Sales rebounded sharply from the pandemic but carmakers have struggled to meet demand due to an ongoing shortage of microchips that has led to repeated factory slowdowns and temporary closures.
Bucking the trend
So far, Tesla seems to have been able to avoid the hit taken by rivals like General Motors, which this week is idling two key pickup plants. But for how much longer is uncertain, as CEO Elon Musk warned last month.
“Our biggest challenge is supply chain, especially microcontroller chips. Never seen anything like it,” Mush said. “Fear of running out is causing every company to over-order — like the toilet-paper shortage, but at epic scale.”
But there are other factors that could play out when Tesla reports for Q2. Its never-shy CEO made a big bet on cryptocurrency earlier this year, investing $1.5 billion in Bitcoin and even announcing that the company would take it as payment. Months later, Musk reversed course, ostensibly because of the energy required for Bitcoin mining. He’s since reversed course again. But that move was one of the factors that triggered a sharp slide in the value of the cyber-currency, and it is unclear how much of a hit Tesla might have taken, as a result.
Another question is how much money Tesla made actually building and selling cars and how much came from selling zero-emission vehicle credits to rivals. As more and more of them bring out their own EVs, demand for Tesla’s credits is expected to decline sharply.
The balance sheet will tell the tale
The EV maker won’t reveal its Q2 numbers until after the day’s final bell, with Musk later speaking to analysts and media. He’s expected to field questions about a variety of issues:
- A year ago, Tesla announced plans to bring out an entirely new battery, dubbed the 4680, which was supposed to be cheaper to produce and potential deliver greater range and other advantages. Since then, Tesla has been quiet about its plans;
- The company has been struggling to finish construction of a plant in Berlin that has drawn the wrath of German environmentalists. While it appears it will go into operation, the project’s delays have helped give competitors like Volkswagen a leg up in Europe;
- Tesla currently lags well behind VW, Stellantis and several others in the European market. But the company faces growing challenges in EV-friendly China, as well as the U.S., where new models like the Ford Mustang Mach-E and VW ID.4 are sharply cutting into its market share;
One of its potential rivals, startup Lucid, received a warm welcome from Wall Street this past week, its shares surging in the wake of its new IPO. Competition aside, Tesla will face a number of other challenges. Raw material costs are rising, as is the price of transporting both parts and finished vehicles.
And the company also faces growing concerns about safety issues related to its Autopilot technology, with several dozen investigations underway by the National Highway Traffic Safety Administration.
Even so, Musk stands behind that technology and, in particular, the latest version which ups the capabilities of the robotic system. There’s good reason: Tesla will be starting to charge $199 a month for the basic Autopilot, and $99 more for the more advanced version. That’s ongoing revenues that could substantially boost its finances long-term.
