Electric car maker Tesla’s earnings fell less than expected in the latest quarter, boosted by price hikes and the sale of three-quarters of the company’s bitcoin reserves.
The company disclosed quarterly financial results on Wednesday evening, showing that revenue fell, although the company reported a profit that exceeded analysts’ expectations.
On a call to discuss the results with financial analysts, CEO Elon Musk said the company decided to sell about three-quarters of its bitcoin holdings during the quarter, which added $936 million in cash to its balance sheet.
Tesla started accepting Bitcoin as payment for its products in early 2021, which is a major boost for the cryptocurrency. Within months, the company said that while it was no longer acquiring bitcoins, it had no plans to sell what it had.
But events in 2022 caused a change of heart.
Musk said the sale was made to increase liquidity when Tesla was unsure how long China’s COVID lockdown would last. Tesla has not sold any of its Dogecoin, which is another cryptocurrency that Musk has expressed support for.
“This shouldn’t be taken as some kind of verdict on bitcoin,” he said, adding that Tesla is open to increasing its cryptocurrency holdings in the future.
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Musk said macroeconomic uncertainty could have some impact on demand for his electric vehicles, but when pressed for details by an analyst, he said the company doesn’t have a demand problem, but a production problem.
He said: “You can’t just raise prices to an arbitrarily high level because you cross the affordability threshold and then demand falls off a cliff.”
“[Prices] are frankly at uncomfortable levels. But we’ve also had a lot of supply chain and manufacturing shocks and we’ve got crazy inflation,” said Musk, who has previously spoken of a “super bad feeling” about the economy.
Tesla has raised prices several times in the past year. For example, the US price of its Model Y long-haul version is now $65,990, up more than 30 percent from early 2021.
Musk said he expects inflation to begin to decline by the end of the year and the prices of most commodities to stabilize, which he hopes will allow Tesla to cut prices slightly.
Tesla shares rose about two percent on Thursday. The stock is down about 40% from its peak in November.
Chief Financial Officer Zachary Kirkhorn said Tesla is still pushing for 50% growth in deliveries this year, adding that while the target has become more difficult, “it remains possible with strong execution.”
Tesla’s factory in China ended the second quarter with a record monthly production level after being forced to close due to lockdowns related to COVID-19.
Musk said the new factories in Berlin and Texas aim to produce 5,000 cars a week by the end of the year, adding that Berlin produced 1,000 cars a week in June. He previously said the new factories were “giant money ovens”.
Morgan Stanley analysts said in a report after Tesla’s earnings call that they see “short-term margin headwinds due to [new] challenges with increasing new production, especially in Berlin.”
Tesla executives acknowledged some ongoing constraints in the supply of older-generation microchips, but said there were no major problems in chip and battery supplies, barring unforeseen shutdowns related to COVID.
The electric car maker posted adjusted earnings of $2.27 per share for the second quarter ended in June, compared with analysts’ consensus estimates of $1.81.
The auto industry’s gross margin fell to 27.9%, down from a year earlier and the previous quarter.
Total revenue fell to $16.93 billion from $18.76 billion a quarter earlier, ending a streak of record earnings in recent quarters. Analysts had expected $17.10 billion, according to Refinitiv.
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