DETROIT (AP) — Tesla on Wednesday reported record fourth-quarter last year net income, and the company forecasts additional software-related earnings will keep its margins higher than any other automaker.
The Austin, Texas-based electric vehicle and solar panel maker said it earned $3.69 billion, or an adjusted $1.19 per share, from October to December. This beat estimates of $1.13 that were lowered by analysts, according to FactSet. The company’s profit is 59% higher than in the same period a year ago.
Revenue for the quarter was $24.32 billion, down from the $24.67 billion expected by analysts.
CEO Elon Musk said that despite an announcement earlier this month of price cuts of up to 20% on some vehicles, demand for Tesla products remains strong and sales are limited to production.
Some analysts say the price cuts were a sign of declining Tesla sales. But so far in January, Tesla has received the highest YTD bookings in its history, Musk said in a webcast with analysts.
“We think that demand will be good, despite the possible reduction in the automotive market as a whole,” he said. “Demand far exceeds production,” Musk said, adding that Tesla is even raising prices a little.
Tesla said in its letter to investors on Wednesday that it will produce about 1.8 million vehicles this year, and Musk predicted that sales would reach that number as well.
Tesla previously said its shipments would grow by 50% a year in most years. But 1.8 million is about a 40 percent increase.
Musk said Tesla could build 2 million cars this year. “There will be demand for that too,” he told analysts.
On Jan. 13, the company cut prices in the US and China, its two biggest markets, leading many analysts to speculate that demand has fallen due to high prices and rising interest rates.
Morgan Stanley analyst Adam Jonas wrote in a note to investors early Wednesday that demand is a problem.
“In our view, the price cuts are indeed a response to a slowdown in demand growth relative to an increase in supply,” he wrote.
Tesla’s automotive gross margin, which is revenue less cost of goods sold, fell from 30.6% in the fourth quarter of 2021 to 25.9% in the same period in 2022 as previous discounts took effect.
Tesla shares rose slightly on Wednesday, closing at $144.43. They rose another 5.5% in extended trading after the earnings report.
Morningstar Equity strategist Seth Goldstein, who is in charge of Tesla, said Musk allayed fears of falling demand by posting a sales forecast of 1.8 million. At least this year, he believes Tesla’s margins will fall even further due to price cuts.
“In the long term, I think profits will bounce back,” he said.
Average selling prices rose in the fourth quarter even as prices fell in China, Goldstein said, and the company was able to increase productivity at new plants in Texas and Germany, he said. But that wasn’t enough to offset higher raw material and shipping costs, he said.
Tesla also said it rolled out its Full Self Driving software to approximately 400,000 users and recognized $324 million in revenue from its Full Self Driving software during the quarter. Despite its name, “Full Self Driving” cannot drive itself, and Tesla warns drivers to be ready to intervene at a moment’s notice.
The company said it is aware of macroeconomic issues due to rising interest rates. “In the near future, we are accelerating our cost reduction roadmap and aiming for higher productivity while remaining focused on delivering the next step of our roadmap,” the letter reads.
Musk was asked how Tesla would mitigate the damage done to the brand following its $44 billion takeover of Twitter, based on a Morning Consult poll showing a sharp decline in Democratic favor.
But Musk said he has 127 million followers on the social media platform and his following continues to grow. “It shows that I’m quite popular,” he said, adding that the number of subscribers speaks for itself.
For the full year, Tesla posted a net income of $12.56 billion, or an adjusted $4.07 per share.
The company’s shares fell 65% last year on fears that Musk was distracted by a $44 billion acquisition of Twitter. But so far this year they have grown by about 35%.
The price cuts, which began on January 13, raised fears on Wall Street that demand for Tesla is falling due to intense competition from startups and legacy automakers.
