Tesla said on Wednesday its second-quarter profits fell nearly a third from the first quarter as shipments slowed due to shutdowns and raw material shortages at the automaker’s Shanghai-based automaker.
Earnings in the quarter were $2.3 billion, Tesla said, compared to $3.3 billion in the first quarter, which was a record. Revenue fell to $16.9 billion from $18.8 billion in the first quarter.
The automaker was also hit by a sharp drop in the price of Bitcoin. Tesla said in early 2021 it had invested $1.5 billion in the cryptocurrency. The company said on Wednesday it had sold about 75 percent of its Bitcoin by the end of June.
Compared to the second quarter of 2021, the profit has almost doubled. And earnings in the quarter exceeded analyst estimates. But because Tesla is a fast-growing company, its progress, or lack thereof, is being watched more closely by investors from quarter to quarter.
Tesla dominates the global electric vehicle market and is growing, while traditional automakers such as Toyota and General Motors are experiencing steep declines in sales. But the last quarter was bumpy.
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Tesla’s April-June vehicle deliveries fell 18 percent from the first three months of the year, an unusual drop for a company that has posted solid quarter-to-quarter profits in recent years. (Deliveries were 26 percent higher than a year earlier.)
In China, which accounts for about 40 percent of Tesla’s sales, the Shanghai plant is plagued by pandemic closures and shortages of key parts and materials. Tesla has failed to increase production at new plants in Austin, Texas and near Berlin as planned.
“It’s been kind of supply chain hell,” Tesla CEO Elon Musk said during a conference call on Wednesday.
He told interviewers from a corporate fan club last month that the plants in Austin and Berlin were “money kilns” costing the company billions of dollars while producing few vehicles. Stepping them up and getting the Shanghai factory back to normal is Tesla’s top priority, he said.
Tesla said production in Shanghai recovered in June and the plants in Berlin and Austin were making progress. “We are focused on a record-breaking 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 have gained significant market share, while Tesla has lost ground in the United States. Tesla had 66 percent share of the U.S. electric vehicle market at the end of the second quarter, according to Kelley Blue Book figures, up from 78 percent in the fourth quarter of 2021.
Tesla’s problems are usually short-lived and earnings should improve in the coming months, Laura Hoy, an equity analyst at the investment firm Hargreaves Lansdown, said in an email. But she expressed concern about Tesla’s exposure to Bitcoin.
“The Bitcoin losses point to an important part of the Tesla investment case – the eccentric owner,” said Ms. Hoy. “While Musk’s impressive innovation has served the company well, his personal flair is starting to raise boardroom questions.”
Mr. Musk said Tesla sold his Bitcoin holdings to increase its cash buffer in light of the problems in Shanghai. “This should not be taken as a judgment on Bitcoin,” he said on Wednesday. Tesla has not sold its holdings of another cryptocurrency, Dogecoin, he said.
Tesla had $18.3 billion in cash and cash equivalents during the quarter, the company said.
Cryptocurrency is an “afterthought” and “not something we think about much,” Mr Musk said.
“Tesla’s fundamental good, the reason we’re doing this, my primary motivation,” he said, “is that the day of renewable energy is coming sooner.”