Tesla Notches Record Profit On Sales Surge–But EV Competition Is Building

Tesla Notches Record Profit On Sales Surge–But EV Competition Is Building

Tesla closed out its best year in company history posting quarterly and annual profit records, powered in large part by its booming operations in China, as Elon Musk’s electric car powerhouse is poised to finally face meaningful competition in the fast-growing battery vehicle market. 

The company said today that it earned $2.05 per share on a GAAP basis in the quarter that ended Dec. 31, 2021, up 750% from a year ago. Excluding some items, EPS was $2.54 per share, topping analysts’ expectations of $2.26. Net income for the period was a best-ever $2.32 billion, an eightfold increase, while revenue was on the high side of expectations at $17.7 billion. Full-year net income was $5.5 billion and revenue was $53.8 billion.

“There should no longer be doubt about the viability and profitability of electric vehicles,” the company said in a statement. “With our deliveries up 87% in 2021, we achieved the highest quarterly operating margin among all volume OEMs, based on the latest available data, demonstrating that EVs can be more profitable than combustion engine vehicles.”

The results come after Tesla said early this month it delivered 936,172 electric vehicles to global customers last year, including 308,600 in the fourth quarter. Sales to customers in China and exports from that market have been the Austin, Texas-based company’s biggest source of growth over the past year, following the opening of its Shanghai plant about two years ago. Analysts expect volume to continue expanding throughout 2022 with the start of production at its new factory in Austin and the opening of Tesla’s Giga Berlin plant in Germany, its first in Europe. 

For a decade Tesla has had little real competition in the EV market, but that’s changing quickly. Automakers including General Motors, Ford, Hyundai, Volkswagen and Toyota are all investing billions of dollars to roll out dozens of new battery models and to upgrade and expand production capacity to build them. At the same time, a new generation of startups including Rivian, Lucid and Fisker are also ramping up production of electric models that will compete directly with Tesla’s lineup. Some of the new vehicles will be priced below those of Tesla, whose cheapest, the Model 3 sedan, costs about $50,000 after taxes and other fees. 

The company also recorded $314 million of pollution credit sales to other automakers during the quarter, a long-time source of free funds. It earned $1.47 billion from those sales in 2022. 

It didn’t provide a precise growth target for this year, saying in its results note that “over a multi-year horizon, we expect to achieve 50% average annual growth in vehicle deliveries.” It’s not promising that for the current year as “our own factories have been running below capacity for several quarters as supply chain became the main limiting factor, which is likely to continue through 2022.”

Shares of Tesla rose 2% to close at $937.41 in Nasdaq trading ahead of the results release. The stock is down 11% so far this year. 

Musk and Tesla CFO Zachary Kirkhorn will provide more details of the results and guidance for the year ahead in a conference call at 5:30 p.m. Eastern time. The carmaker’s billionaire CEO is also expected to provide details on new models including the delayed Cybertruck electric pickup he unveiled in 2019. 

It’s unclear whether he’ll also comment on ongoing reviews by federal safety regulators and California’s Department of Motor Vehicles of the company’s Autopilot driver-assist function that’s linked to numerous accidents.  

Coincidentally, Tesla’s results release and Musk’s comments come the same day that President Joe Biden welcomed auto- and engine-makers to the White House, including the CEOs of GM, Ford and Cummins, to discuss his stalled Build Back Better legislation that would provide billions of dollars in new funding to expand EV production and enhanced incentives for consumers to buy them.

Musk, whose company has benefited greatly over the years from federal loans and incentives for electric vehicles, is a vocal opponent of Build Back Better.