Elon Musk announced that Tesla more than doubled its profit during the company’s third quarter (Q3) earnings call, driven by an uptick in electric vehicle (EV) sales amid rising U.S. fuel costs.
Tesla Inc. reported Q3 earnings on Wednesday, revealing that the Austin, Texas-based EV manufacturer’s net income had more than doubled to $3.29 billion from July through September.
Excluding special items, Tesla made $1.05 per share, beating Wall Street estimates of $1 per share, according to data provider FactSet. Revenue rose by 56% to a record $21.45 billion but fell just short of the $21.98 billion average estimate.
“To the best of our knowledge, we believe that Tesla will continue to grow deliveries and revenue, production at a 50% or greater compound annual growth rate,” Musk said.
The third quarter of 2022 was another strong quarter with record revenue, operating profit, and cash flow, Tesla detailed in its Q3 financial summary. In addition, the company’s free cash flow exceeded $8.9 billion, and its operating margin reached 17.2% in the last 12 months.
“We achieved an industry-leading operating margin while encountering material headwinds year-over-year,” Tesla reported in its Q3 report. “Raw material cost inflation impacted our profitability along with ramp inefficiencies from Gigafactory Berlin-Brandenburg, Gigafactory Texas, and 4680 cell production.” The company added that the relative strength of the U.S. dollar compared to all other major currencies also had an impact.
Despite expectations that Tesla will fall short of its 50% annual growth target by the end of this year, the company still sold 343,830 cars and SUVs from July to September compared to the 254,695 deliveries made in the second quarter of 2022, according to Tesla’s Chief Financial Officer Zachary Kirkhorn.
Transportation shortfalls are expected to be the leading cause of the missed growth target, Musk and Kirkhorn said during their quarterly conference call.
Regardless of the operational stumbles this year, Musk is confident about Tesla’s growth in 2023. Tesla’s CEO is considering a $5 billion to $10 billion stock buyback for next year. Meanwhile, he said the company’s “Full Self Driving” feature will roll out next year “without question whatsoever.”
Tesla has delivered 908,573 vehicles at an average cost of $49,000 since the start of the year. In 2021, the company delivered slightly over 936,000 vehicles. Tesla will need to sell more than 490,000 additional vehicles to meet the company’s 50% growth target of 1.4 million cars sold. With a 35% increase in EV sales during Q3, Musk still could meet his end-of-the-year target.
Tesla’s third-quarter highlights are as follows:
Cash
- Operating cash flow less Capex (free cash flow) of $3.3B in Q3
- $2.2B increase in cash marketable securities in Q3 to $21.1B
Profitability
- $3.7B GAAP operating income; 17.2% operating margin in Q3
- $3.7B GAAP net income; $3.7NB non-GAAP net income in Q3
- 9% GAAP Automotive gross margin in Q3
Operations
- Record Energy Storage deployment of 2.1 Gwh in Q3
- Initiated transition to smoother delivery and production mix