Tesla's second-quarter earnings hit by supply chain issues and Bitcoin

Tesla said on Wednesday that second-quarter profits fell nearly a third from the first quarter as deliveries slowed due to shutdowns and...


Tesla said on Wednesday that second-quarter profits fell nearly a third from the first quarter as deliveries slowed due to shutdowns and shortages of raw materials at the automaker’s Shanghai plant.

Profit in the quarter was $2.3 billion, Tesla said, up from $3.3 billion in the first quarter, which was a record. Sales fell to $16.9 billion from $18.8 billion in the first quarter.

The automaker was also hit by a sharp drop in Bitcoin price. Tesla said in early 2021 that it had invested $1.5 billion in cryptocurrency. The company said on Wednesday that it had sold around 75% of its Bitcoin by the end of June.

Compared to the second quarter of 2021, profit almost doubled. And earnings for the quarter beat analysts’ estimates. But because Tesla is a fast-growing company, its progress, or lack thereof, from quarter to quarter is more closely watched by investors.

Tesla dominates the global electric vehicle market and is growing, while traditional automakers like Toyota and General Motors are seeing steep declines in sales. But the last quarter was bumpy.

Tesla’s vehicle the deliveries from April to June fell 18% from the first three months of the year, an unusual decline for a company that in recent years has posted strong quarter-over-quarter gains. (Shipments were up 26% over the previous year.)

In China, which accounts for about 40% of Tesla’s sales, the Shanghai factory has been plagued by pandemic-related shutdowns and shortages of key parts and materials. Tesla was unable to ramp up production at new factories in Austin, Texas, and near Berlin as planned.

“It’s a bit of supply chain hell,” Tesla chief executive Elon Musk said in a conference call Wednesday.

He told interviewers at a company fan club last month that the Austin and Berlin plants were “silver furnacescosting the company billions of dollars while producing few vehicles. Getting them up to speed and getting the Shanghai factory back to normal operation is Tesla’s top priority, he said.

Tesla said production in Shanghai rebounded in June and factories in Berlin and Austin were making progress. “We are focused on a record second half of 2022,” Tesla said in its earnings presentation.

The electric vehicle market is becoming more competitive and traditional automakers are eroding Tesla’s lead. Hyundai, Kia and Ford Motor gained significant market share, while Tesla lost ground in the United States. Tesla held 66% of the U.S. electric vehicle market at the end of the second quarter, according to figures compiled by Kelley Blue Book, up from 78% in the fourth quarter of 2021.

Tesla’s problems are mostly short-term and earnings should improve in the coming months, Laura Hoy, an equity analyst at investment firm Hargreaves Lansdown, said in an email. But she expressed concern about Tesla’s exposure to Bitcoin.

“Bitcoin’s losses underscore an important part of Tesla’s investment case — its eccentric owner,” Ms. Hoy said. “While Musk’s impressive innovation has served the company well, his personal flair is beginning to raise questions of governance.”

Mr. Musk said Tesla sold its Bitcoin holdings to increase its cash cushion in light of the problems in Shanghai. “This should not be taken as a verdict on Bitcoin,” he said Wednesday. Tesla has not sold its holdings of another cryptocurrency, Dogecoin, he said.

Tesla had $18.3 billion in cash and cash equivalents in the quarter, the company said.

Cryptocurrency is a “sideshow” and “what we don’t think about much,” Musk said.

“The fundamental good of Tesla, the reason we’re doing this, my main motivation,” he said, “is to make the day of sustainable energy come sooner.”

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Newsrust - US Top News: Tesla's second-quarter earnings hit by supply chain issues and Bitcoin
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