By Hyunjoo Jin and Akash Sriram
(Reuters) – Tesla Inc beat Wall Street targets for fourth-quarter revenue and profit on Wednesday but posted a sharp decline in vehicle profit margins, leaving shares of the electric car maker close to flat from their market close.
Tesla forecast a 37% rise in car volume for the year, to 1.8 million vehicles.
GRAPHIC: Tesla expects to deliver 1.8 million vehicles this year (https://www.reuters.com/graphics/TESLA-RESULTS/jnpwywnbrpw/chart.png)
Tesla’s sales prospects after a huge price cut early this year, facing a weak global economy, are a key focus for investors. The company has a long-term target of a compounded 50% annual rise.
Tesla addressed concerns about economic and competitive pressures, saying its “relentless cost control and cost innovation is why we believe no other OEM is better equipped to navigate through 2023.”
“In any scenario, we are prepared for short-term uncertainty,” it added.
Tesla has outperformed the industry and increased sales and profit to records in recent years, weathering the pandemic and global supply-chain issues better than rivals. But its recent, steep global price cuts mark a move toward stimulating growth at the expense of profit margins, underscoring softening demand.
“Tesla’s demand outlook is a whole lot more bullish than practically any other automaker,” said Garrett Nelson, analyst at CFRA Research, calling the quarter “solid.”
“Margin fell a little short. I think what we’re seeing is inflationary impact and higher raw material costs,” he added.
The company said revenue was $24.32 billion for the three months ended Dec. 31, compared with analysts’ average estimate of $24.16 billion, according to IBES data from Refinitiv.
Tesla said its automotive operation margin was 25.9% in the fourth quarter, the lowest in two years.
Tesla offered discounts in its top markets during the quarter after strong orders had allowed the company to maintain and even raise prices in recent years. CEO Elon Musk said in December “radical interest rate changes” had affected the affordability of all cars.
The EV maker handed over to customers a record 405,278 vehicles in the fourth quarter, even as the company missed its 50% annual growth target.
Net profit for the quarter was $3.69 billion, or $1.07 per share, compared with $2.32 billion, or 68 cents per share, a year earlier. Adjusted earnings per share of $1.19 topped the Wall Street analyst average of $1.13.
Tesla’s full-year profit was bolstered by $1.78 billion in regulatory credits, up 21% from a year ago.
Tesla’s year-end cash hoard of $22.2 billion, and up to $7 billion in funds available in a new credit facility the company disclosed on Wednesday, give it ammunition to fight the price war it started earlier this month.
(Reporting by Akash Sriram in Bengaluru, Hyunjoo Jin in San Francisco, Joe White in Detroit and Kevin Krolicki in Singapore; Writing by Peter Henderson; Editing by Sriraj Kalluvila and Matthew Lewis)
