Tesla (TSLA) Quarterly Report 2023

Employees of the Tesla Gigafactory Berlin Brandenburg work on the final inspection of the finished Model Y electric vehicles. The Tesla plant was opened and put into operation on March 22, 2022.

Patrick Pleuil | Picture Alliance | Getty Images

Shares of electric vehicle maker Tesla fell more than 4% after the company reported first-quarter earnings after the market close. Here are the results.

• Earnings per share: 85 cents adj. vs. 85 cents expected, according to the median analyst estimate compiled by Refinitiv
• Revenue: $23.33 billion versus $23.21 billion expected, according to Refinitiv estimates

Net income was $2.51 billion, down 24% year over year, while GAAP income was 73 cents, down 23% from the year-ago quarter.

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Tesla said in a shareholder deck that “underutilization of new factories” weighed on margins, along with higher raw material, commodity, logistics and warranty costs and lower environmental credit revenue, all of which contributed to the year-over-year decline in profits.

Automotive sales, Tesla’s core segment, hit $19.96 billion in the quarter, up 18% year over year. Total sales increased by 24%. Automotive regulatory lending revenue for the first three months of 2023 was $521 million compared to $679 million in the first quarter of the prior year.

In a conference call on the results, CEO Elon Musk highlighted an “uncertain” macroeconomic environment that could impact people’s car shopping plans. During a Q&A with analysts, Musk said he expects 12 months of “stormy weather” in the economy. He warned, “Any time the Fed raises interest rates, it equates to an increase in the price of a car.” He also said that whenever there is uncertainty in the economy, people generally “make big new capital purchases, like a new car ” postpone.

He said, “We believe the pursuit of higher volumes and a larger fleet is the right choice here, as opposed to lower volume and higher margin,” but noted that he expects Tesla vehicles to ” can achieve significant gains over time through autonomy.”

When the company began discussing its ambitions in self-driving technology in 2016, Musk said the company would be conducting a hands-free tour of the United States by the end of 2017. This mission has yet to be completed.

Tesla Energy’s revenue rose to $1.53 billion, up 148% from the prior-year period. Deployment of Tesla’s energy storage systems increased to 3.9 GWh, or 360%, according to the company. These Tesla-manufactured, lithium-ion battery-based energy storage systems include the home backup battery called Powerwall and the utility-scale Megapack system, which allows utilities to store more energy from renewable but intermittent sources such as solar power and to use and wind.

Tesla’s first-quarter earnings call was streamed live via Twitter, a first for the electric vehicle maker. CEO Elon Musk sold his billion-dollar holdings in Tesla in 2022 to fund a $44 billion buyout of the social media company, of which he is now CEO.

The company cut prices on its vehicles late last year and into the first quarter of 2023, including additional cuts Tuesday night. At the same time, Tesla is drawing up ambitious plans for expansion and increased capital spending.

Tesla currently sells four EV models that are produced at two vehicle assembly plants in the US, one in Shanghai and one outside of Berlin.

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Shareholders who submitted questions for management review prior to the earnings call sought updates on the company’s trapezoidal, sci-fi-inspired cybertruck, the company’s energy-saving division and the timeline for a new Tesla model vehicle.

During the call, Musk said Tesla is now building “alpha versions of the Cybertruck” on a pilot line. The company intends to produce the Cybertruck at its Austin, Texas facility. Musk said he anticipates an event to kickstart Cybertruck deliveries in the third quarter of 2023.

In 2023, Tesla expects to produce 1.8 million vehicles, Musk reiterated, or possibly an “upside” volume of 2 million vehicles this year.

Earlier in April, Tesla reported vehicle deliveries of 422,875 vehicles in the first quarter, the closest approximation to the company’s reported sales. Production in the first three months of 2023 was slightly higher than deliveries at 440,808 vehicles.

A month earlier, Musk had announced plans to build a Tesla factory in Monterrey, Mexico, a day’s drive from a relatively new factory in Austin, Texas. And recently, Tesla said it plans to build a factory in Shanghai to manufacture megapacks, or large-scale, lithium-ion battery-based energy storage systems.

According to a financial report released in late January, Tesla expects to spend between $7 billion and $9 billion in 2024 and 2025, representing an increase in capital expenditures of about $1 billion over the next two years.

Tesla shares have rebounded from a dismal 2022 this year, when they lost about two-thirds of their value alongside a slump in tech companies. The stock is up 48% in 2023.

REGARD: CFRA’s Garrett Nelson is bullish on Tesla’s long-term earnings growth