Tesla Q2 2022 Report Shows Crypto Sales, Decline in Profits
Tesla has already reported the number of vehicle shipments for the second quarter, and now the full financial report for the second quarter of 2022 (pdf) reveals that it is dealing with inflation and the general economic slowdown, combined with a drop in the prices of Bitcoin and other cryptocurrencies. In the letter to investors, Tesla executives reveal that the company has sold 75 percent of its Bitcoin holdings, adding $936 million in cash to its balance sheet.
Last year, Tesla made a $1.5 billion investment in Bitcoin and announced that it would accept Bitcoin as payment. Tesla began accepting Bitcoin in late March, and abruptly reversed course in May, just 49 days later.
In the latest report, Tesla says the value of its remaining “digital assets” is $218 million, which it had reported at around $1.2 billion in previous quarters. Last July, Musk said: “I might pump, but I don’t dump… I definitely don’t believe in getting the price high and selling or anything like that. I would like to see Bitcoin succeed.”
When it comes to its business making electric cars — where new competitors seem to be announced every day — and solar products, the company reports that it earned $2.26 billion in profit this quarter, down about 31 percent from the previous quarter when it posted profits of $3.3 billion. The profit was made on $16.9 billion in revenue, which is also down from Q1, where the company reported bringing in $18.7 billion.
In terms of profitability, the company is still doing better than it did in Q2 2021, where it earned $1.1 billion on $11.9 billion in revenue. The company attributes that to several factors, including “lower inventory-based compensation expense,” more vehicle deliveries compared to last year, and an improved average selling price. This is the first full quarter since Tesla raised prices on all its cars by as much as 10 percent, and it raised prices again on select models in June. Despite the price increases, the company has broken with the trend of earning more per car each quarter. In Q1, the gross margin for the automotive industry was 32.9 per cent. This quarter it was 27.9 percent.
Tesla announced earlier this month that deliveries have slowed, falling by around 18 percent compared to Q1. It also produced around 15 percent fewer cars this quarter compared to last. In its earnings report, Tesla said it faced “limited production and shutdowns in Shanghai for most of the quarter” but continued to ramp up production at its new facilities in Berlin and Austin, Texas.
Other difficulties the automaker reports are increased prices for everything from raw materials to logistics, higher fixed costs per car due to the closures in Shanghai, and, of course, the aforementioned “Bitcoin slowdown.”
Compared to the previous quarter, the company’s revenue from selling regulatory credits to other automakers fell by nearly 50 percent. In Q1 it brought in $679 million from the credits, and in Q2 it made just $344 million. The credits help other companies that do not make enough “clean” vehicles to meet regulatory standards in the US and EU.
Culturally speaking, it has been a turbulent quarter at Tesla. In late April, CEO Elon Musk sold billions of dollars worth of shares in the company to help pay for Twitter (a deal that has been a huge mess and is now headed to Delaware’s Court of Chancery after Elon tried to cancel arrangement). Musk also reportedly said he has a “super bad feeling” about the economy when he announced the hiring freeze and layoffs at the company. Those layoffs have affected the Autopilot team, and Tesla has been accused of violating labor laws after allegedly letting go over 500 Gigafactory workers. The company also lost its head of AI earlier this month.
However, it hasn’t been all bad news. Tesla’s partnership with Uber and Hertz, where qualified ride-sharing drivers can rent the electric cars to ferry passengers around, appears to be going well based on a report from Uber in June. It also appears that 2022 will be the year that non-Tesla EVs will gain access to the Supercharger network in the US, based on a fact sheet released by the White House.
The company will discuss the results for the 2nd quarter at an investor call at 5:30 PM ET / 2:30 PM PT, which you can listen to here.
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