Tesla reports record quarterly earnings, blowing past Wall Street’s expectations

By Chris Isidore, CNN Business

Tesla reported stronger-than-expected second quarter, with a record net income of $1.1 billion.

It was far more than double the $438 million it made in the first quarter, and more than 10 times the net income it reported a year ago. And it answered a major criticism of investors who’ve been bearish on the stock over the strength of Tesla’s results.

Notably, Tesla didn’t depend on selling regulatory credits to other automakers to achieve its blockbuster earnings. Those credits were responsible for just $354 million in revenue in the quarter. In previous quarters, even when Tesla reported positive adjusted earnings, its net income depended on selling credits to rivals that needed to buy them to meet tougher environmental standards. Critics have long attacked Tesla for that, saying the company wasn’t making money actually selling cars.

The company’s adjusted income, which is the measure more closely watched by investors, jumped to $1.6 billion, far better than the $1.1 billion forecast by analysts. It was also up from its previous record earnings on that basis of $1.1 billion in the first quarter. Revenue of $12 billion also easily topped forecasts of $11.3 billion.

Chip and battery shortage

But CEO Elon Musk did acknowledge that the company’s growth has been hampered by the computer chip shortage hitting all other automakers and many other manufacturers.

“While we’re making cars at full speed, the global chip shortage situation remains quite serious,” he told investors. “For the rest of this year, our growth rates will be determined by the slowest part in our supply chain,” adding that there are a wide range of chips that will serve as that brake on growth.

And Tesla and Musk did give cautious outlook about a number of other plans and products it has promised.

Tesla repeated its earlier guidance that it expects to complete construction of factories near Austin, Texas, and in Berlin and start limited production of the Model Y SUV at those plants later this year.

But it’s not just a chip shortage dogging the company. There is also a shortage of the cells used to make the large batteries each vehicle needs.

Tesla said Monday that it won’t start production of its Cybertruck pickup until after the Model Y is up and running in Texas. And it pushed back the plans for a semi-tractor truck until 2022 “due to the limited availability of battery cells and global supply chain challenges.”

“Cybertruck and Semi, actually both are heavy users of [battery] cell capacity,” said Musk. “So we’ve got to make sure we have the cell capacity for those two vehicles. We are looking at a pretty massive increase in cell availability next year.” But he said that increase won’t all be available at the start of 2022 but will “ramp up through the course of next year.”

Challenges for Cybertruck

A number of other established automakers such as Ford and General Motors on the verge of selling their own electric pickups, so there is pressure on Tesla to get its first pickup into the market. The company was already on the record saying it was expecting “volume production” of the Cybertruck in 2022.

Musk also acknowledge that the pickup’s unusual design will make the launch a challenge.

“It’s such a new architecture. It’s going to be a great product. It might, I think, be our best product ever,” he said. “But there’s a lot of fundamentally new design ideas …. So there’ll probably be challenges because there’s so much unexplored territory.”

In a tweet recently he said Tesla will open up its supercharger network to electric vehicles from other automakers later this year. While he still didn’t have details, he said the plan to do that will lower charging costs for Tesla customers. And he said it’s in keeping with the company’s overall mission to convert the world from gasoline powered cars to EVs.

“Our goal is to support the advent of sustainable energy,” he said. “It is not to create a walled garden and use that to bludgeon our competitors, which is sometimes used by some companies.”

While Musk thinks full-self-driving subscriptions will produce significant revenue starting next year, “right now … does it make sense for somebody to do FSD subscription? I think it’s debatable.”

Small loss on bitcoin holdings

In February, Tesla disclosed it used some of its cash on hand to purchase $1.5 billion in bitcoin. In April, it disclosed that it has sold some of those holdings and booked net income of $101 million from its crypto trading. The bitcoin transactions made some investors nervous, especially since the cryptocurrency has lost more than a third of its value since then. Some had expected the company could report a $75 million loss on its bitcoin trading in the quarter, said Dan Ives, tech investor for Wedbush Securities. But instead it reported only a $23 million loss.

“While supply chain issues remain, it appears to be moderating heading into the next six to nine months,” said Ives. He said the report should confirm those expecting Tesla to hit full-year sales of 900,000 vehicles, up from the 500,000 it sold in 2020. It sold 386,000 cars in the first half of this year, more than double what it sold in the first half last year.

“The automaker benefited from record sales and reduced internal costs to overcome rising material costs and a $23 million bitcoin ‘impairment,'” said Karl Brauer, executive analyst at iSeeCars.com. “Tesla’s numbers, beating estimates by a healthy margin, confirm strong global demand for EVs continues, enough to more than offset Tesla’s near-term challenges.”

One of his last quarterly calls

Musk’s comments were rather mild compared with some of his previous quarterly earnings calls, in which he sometimes picked fights with analysts or went on rants against safety measures put in place to combat the Covid-19 pandemic, calling them “fascist.” He said Monday that it will be uncommon in the future for him to be on the call at all.

“If I’m doing interviews and I can’t do actual other work,” he said. “I only have so much time in the day.”

Musk, who is also CEO of SpaceX, has a tunnel-digging company called the Boring Company and recently hosted Saturday Night Live, suggested his time constraints would keep him off many quarterly calls in the future.

“I’ll do the annual shareholder meeting, but I think going forward, I will most likely not be on earnings calls unless there’s something really important that I need to say.”

Tesla shares have been battered this year as earlier earnings reports, while strong, had fallen short of Wall Street hopes. Shares of Tesla initially were up slightly in after-hours trading following his call.

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