Several analysts have pointed out that Tesla has a demand issue. However Musk downplayed the problems in the earnings call. The company is seeing strong demand for its products and has seen the highest orders year-to-date in its history. Orders are currently almost twice the rate of production. Despite a contraction in the automotive market as a whole, the company believes demand will be good and has raised the price of one of its models in response to high demand. The company’s goal is to make its cars affordable to as many people as possible.
The company also sustains that it is making progress on cost control and seeing a drop in production costs in their Berlin and Austin factories.
The company is increasing the production rate of 4680 cells and capacity for those cells by 100 gigawatt-hours, with a goal to produce more than 1,000 gigawatt-hours of cells internally and through other cell providers. They have plans for making the 4680 cell low-cost and high energy density, ahead of the cybertruck launch.
On the financial front, the company had an overall increase in revenue of over 50% and operating income doubled, free cash flows increased by over 50% as well as industry-leading margins. The company continued to make progress on overhead efficiencies. However, for Q4, the sequential and annual margin was impacted by price reductions due to COVID impacts in China, uncertainty around the consumer tax credit in the US, and a rising interest rate environment. Additionally, the cost per unit increased on a year-over-year basis, driven mainly by lithium prices, inefficiencies in new factories, and moving towards a more expensive vehicle model.
Tesla argues that its production potential is closer to 2 million vehicles, but they are indicating 1.8 million due to potential supply chain interruptions. The company’s numbers were weighed down by the 4680 ramp, the Berlin, Austin, Giga castings, processes, not at rate.
In conclusion, despite analysts pointing out that Tesla has a demand issue, the company downplayed the problems in the earnings call and stated that it is seeing strong demand for its products. Orders are currently almost twice the rate of production and the company has raised the price of one of its models in response to high demand. The company is also making progress on cost control and seeing a drop in production costs in their Berlin and Austin factories.