Tesla shares fall as Elon Musk admits demand restraints

Tesla shares fell in early trade yesterday after the electric carmaker reported lower-than-expected earnings and admitted it is not immune to economic headwinds.

Revenue for the third quarter rose 56 percent to $21.5 billion, below analysts’ median estimate of $22.1 billion. The maker of Model 3 sedans and Model Y SUVs said it expects to fall short of its target of 50 percent growth in vehicle deliveries, partly due to difficulties getting cars from plants to customers.

CEO Elon Musk kicked off Tesla’s earnings call with exuberance, telling analysts he’s looking forward to “an epic year-end.” He later acknowledged that the downturn in China and Europe and the Federal Reserve’s rate hikes are affecting orders.

“Demand is a little tougher than usual,” Musk said. “But like I said, we’re very confident for a great Q4.”

Tesla shares fell 7.6 percent to $205.20 as of 9:37 a.m. in New York. The stock is down 37 percent this year through Wednesday’s close.

Getting cars onto ships, trains, and trucks proved costly and challenging last quarter, as much of the electric-vehicle maker’s output was focused in recent weeks. This helped Tesla produce over 22,000 more cars than it shipped during the period, worrying some investors who wrapped up in the earnings report.

Chief Financial Officer Zachary Kirkhorn warned that investors should expect another gap between production and deliveries in the fourth quarter as more cars are on the way towards the end of the year that will be delivered early in the first quarter.

Mr Kirkhorn also said costs related to ramping up production at Tesla’s newest factories in Austin, Texas and near Berlin, Germany weighed on profitability. While these expenses will continue to weigh on year-end margins, the company expects less of an impact than in the third quarter.

The company’s automotive gross margin declined to 27.9 percent in the quarter, below the average analyst estimate of 28.4 percent.

“Tesla is a company that usually beats numbers,” said Gene Munster, managing partner of Loup Ventures, a venture capital firm. “The reaction you’re seeing is people are a little bit surprised they missed it.”

Tesla said earnings excluding some items rose to $1.05 per share, beating the median estimate of $1.01 compiled by Bloomberg.

To address transportation bottlenecks, Tesla is attempting to streamline its delivery and logistics processes and move away from its costly quarter-end handover rush to customers.

In April, Mr Musk said Tesla would produce more than 1.5 million vehicles this year. The company earned 929,910 in the first three quarters, which means it will have to spend more than 570,000 in the fourth quarter to reach that goal. In the last three months of 2021, 305,840 vehicles were produced.

https://www.independent.ie/business/world/tesla-shares-drop-as-elon-musk-admits-demand-constraint-42083466.html Tesla shares fall as Elon Musk admits demand restraints

Fry Electronics Team

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