Tesla reports record earnings

Tesla reported record profits for the fourth quarter and the full year, but its profit margins were tighter due to higher costs, recent price cuts, and sales in the quarter that were weaker than hoped, Report informs via CNN.

The leading electric vehicle maker posted adjusted earnings of $1.19 per share in the quarter, up from 85 cents a share a year earlier, and its previous record of $1.07 a share in the first quarter. Analysts surveyed by Refinitiv had forecast EPS of $1.13.

For the full year, the company had adjusted earnings per share of $4.07, up from $2.26 in 2021.

But the closely-watched automotive gross margin fell to 25.9% from 27.9% in the third quarter and 30.6% in the fourth quarter a year ago.

Tesla gets hundreds of million dollars each year selling the governmental credits it receives for selling only zero-emission cars. Traditional automakers, which still sell primarily gasoline-powered cars, buy those credits from Tesla in order to avoid fines for not meeting strict emissions rules. Many auto analysts strip out those credits when calculating the profit margins Tesla achieves on its automotive operations.

When those credits are excluded, Tesla’s automotive gross margin fell to 24.3% in the quarter, a couple percentage points below many estimates, and down from 26.8% in the third quarter and 29.2% in the fourth quarter of 2021.

Its revenue edged past forecasts, however, rising 37% from a year earlier to $24.3 billion in the quarter. The consensus forecast was for revenue of $24.2 billion.

Tesla set a sales target 1.8 million vehicles for this year, up 37% from 2022 sales of 1.3 million vehicles. Still, that would be the company’s slowest percentage growth since 2020, when the first year of the pandemic upended sales.

CEO Elon Musk said the price cuts announced late last year and earlier this year has spurred demand for its cars and that orders are now outpacing production by a two-to-one margin.

Musk said Tesla would have capacity to make about 2 million cars this year, if everything goes smoothly. But he said he can’t count on that, especially after disruptions in recent years.