Tesla’s profit was much higher than expected.
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Tesla’s first quarter figures, announced Wednesday afternoon, look surprisingly great. The company essentially beat inflation by replacing materials and relentlessly focusing on production.
Shares are higher, recovering some losses observed earlier in the day.
The company (ticker: TSLA) won a record $ 3.22 per share of $ 18.8 billion in total sales, its highest ever. Wall Street was looking for EPS of about $ 2.20 to $ 2.30 per share of about $ 18 billion in sales, while in the fourth quarter of 2021, Tesla earned $ 2.54 per share of sales of $ 17.7 billion.
Operating profit reached a record $ 3.6 billion, compared to expectations of about $ 2.6 billion.
Shares rose 4.2% in after-hours trading to about $ 1,019 per share shortly after the results were released. Shares fell about 5% in regular trading on Wednesday, while the Nasdaq Composite lost about 1.2%. The S&P 500 fell 0.1%.
The sales of regulatory credits that Tesla receives because it produces more than its fair share of low-emission vehicles have come as a surprise. Credit sales reached $ 679 million in the first quarter, more than doubled expectations of about $ 312 million.
But even excluding credit sales, operating profit was record-breaking and much better than Wall Street had expected.
Analysts forecast a decline in profits from the fourth to the first quarter, as inflation had to be a headwind for the company. The average price in the first quarter for a basket of metals included in batteries for electric vehicles increased by more than 70% in the first quarter compared to the fourth.
Tesla’s management cites inflationary pressures in a news release. But the price of a Tesla car actually fell compared to the fourth quarter.
This, along with most of the numbers reported, was a surprise. One potential, partial explanation is that Tesla is buying under long-term contracts. This can slow down the impact when spot prices rise.
Another reason why costs fell was that about half of the cars Tesla shipped in the first quarter included iron-phosphate or LFP batteries. These are lithium-ion batteries without more expensive cobalt or nickel, metals that allow better performance. LFP batteries don’t pack as much energy in the same cell, but the standard Model 3 with LFP package still gets 267 miles of charging, according to the company.
Shares are expected to rise on Thursday.
The next point you need to watch is what comes out of the conference to discuss the results, which starts at 17:30 Eastern Time. Investors and analysts will be interested to hear about production at Tesla’s new plants in Austin, Texas and Berlin, Germany. They will also want to hear about the outbreak of Covid-19 in China.
The Tesla facility in Shanghai was closed in late March due to local restrictions on Covid. Restricted production has reportedly resumed, but the situation is still volatile. Tesla, for example, needs its Chinese supplier to keep working to increase production again.
Tesla said in a news release that it expects to operate at capacity over the next few quarters due to Covid in China and supply chain constraints. The company still expects to achieve an average annual growth rate of 50% in multi-year vehicle deliveries.
Options markets assumed 5% movement, up or down, after the announcement of profits. Shares fell three of the last four times Tesla reported quarterly data. All four times the company exceeded analysts’ forecasts.
This is breaking news. Check back soon for more details and analysis.
Write to Al Route at allen.root@dowjones.com
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