News Apr 27

Tesla earnings helped by Chinese demand but shares dip

Tesla reports first quarter revenue slightly ahead of expectations on Chinese demand and regulatory credit sales, but its shares fell after hours

Tesla earnings helped by Chinese demand but shares dip
Elon Musk has Chinese sales to thanks for strong first quarter Tesla revenues, but investors marked down its shares after first quarter earnings were announced. File picture from 2019: Reuters.

(ATF) Tesla reported first quarter revenue just above Wall Street expectations on Monday April 26, helped by strong demand from China and a boost from regulatory credit sales to other auto firms. Its shares dipped nevertheless, in a contrast to a rise in US-listed shares for Chinese rival Nio.

Tesla’s sales of regulatory permits were higher than its quarterly profit, in line with the trend of recent quarters, and net profit was dented by a $299 million award to chief executive Elon Musk, but still hit a record.

Tesla’s shares fell -3% when its results were announced just after the US close but recovered some losses when Musk delivered an optimistic view about the company’s prospects on a conference call with analysts. Nasdaq-listed shares of Nio, Tesla’s Chinese electric vehicle rival, performed better, with a +3.75% rise.

Broadly positive results for Tesla - including its record quarterly profit - helped both the Nasdaq and the S&P 500 hit new records on the day.

Tesla saw record first-quarter deliveries despite a global chip shortage that has slammed auto sector rivals, but that news had been digested before the earnings release on Monday. Model Y production in China has spurred demand in the country and helped to boost sales.

Tesla faces challenges in living up to its valuation as the most expensive auto firm and managing expectations for growth, however.

The company said it was able to navigate through global chip supply shortage issues in part by pivoting quickly to new chips, while simultaneously developing software for chips made by new suppliers.

Its vehicle average selling price nevertheless fell by 13% as production of pricier Model S and Model X vehicles stopped ahead of major updates.

Model S

Tesla said first deliveries of the new Model S should start shortly, while Model Y production rate in Shanghai continued to improve.

Tesla said it expects this year's volume growth to exceed 50%, while saying that it is on track to start production and deliveries at its planned factories in Texas and Berlin this year.

In the United States, its full self-driving software is facing federal investigations following 28 crashes of Tesla vehicles, including a crash in Texas that killed two.

And in China, home to Tesla’s second vehicle factory, Tesla has been under growing pressure from the government over information confidentiality and from some members of the public - including a woman who protested about brake problems during the Shanghai auto show.

Adding to the headwinds, refreshed versions of the pricier Model S sedan and Model X SUV have been delayed at a time when established rivals such as Volkswagen and Ford are rolling out all-electric vehicles, aiming to compete on price and style.

Tesla said revenue rose to $10.39 billion from $5.99 billion a year earlier.

Analysts had expected revenue of $10.29 billion, according to IBES data from Refinitiv.

Tesla earned $518 million from sales of regulatory credits in the first quarter, up 46% from a year earlier. Tesla earns credits for exceeding emission and fuel economy standards and sells them to other automakers that fall short of the goals.

Adjusted profit of 93 cents per share topped Wall Street’s consensus of 79 cents.

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