Shares of Tesla (NASDAQ: TSLA) traded in a volatile manner on Tuesday after the company reported Q2 deliveries over the weekend.
How Tesla Did in Q2?
The EV company reported it delivered 254,695 cars in the second quarter, missing the consensus estimates of 256,520 as the carmaker grappled with coronavirus restrictions in China, supply chain constraints, and chip shortage. Tesla’s total car production in the quarter stood at 258,580.
The report compares 201,250 units Tesla delivered in the same period last year and 310,048 it delivered in Q1 2022. The new deliveries report represents a sales growth of 26.5% from the year-ago period and a 17.9% decline from the previous quarter.
Tesla has previously said it expects roughly 50% average annual growth in the long run, subject to manufacturing capacity and various other factors.
“We plan to grow our manufacturing capacity as quickly as possible. Over a multi-year horizon, we expect to achieve 50% average annual growth in vehicle deliveries,” the company said when it reported Q1 2022 results.
In this quarter, the world’s largest electric vehicle maker had to completely or partially shut down operations for a number of weeks at its Shanghai plant due to coronavirus lockdowns in China’s most populous city.
Other headwinds, including supply chain constraints that were exacerbated due to the ongoing war in Ukraine, also weighed on Tesla and the broader car industry.
Cash Burn Factories
Furthermore, the EV maker continues to face mounting costs of building out and initiating production at its new assembly plants in Austin, Texas, and Berlin. The company’s CEO Elon Musk said that the new factories are costing Tesla billions of dollars and the automaker hasn’t yet produced enough vehicles to justify the expenses.
“Both Berlin and Austin factories are gigantic money furnaces right now. OK? It should be like a giant roaring sound which is the sound of money on fire,” Musk said.
He said that these plants are losing billions of dollars at the moment due to immense costs and “hardly any output.”
Tesla’s boss added that getting Berlin and Austin factories functional is the company’s biggest concern right now.
Musk explained that Tesla is sustaining substantial losses at its Texas factory due to issues with ramping up production of cars using the 4680 battery, the carmaker’s latest technology. Furthermore, the company’s tools it uses to build cars for the traditional 2170 batteries remain stuck in China ports.
He said that just attempting to keep the factories operating in the past years has been very challenging due to “extremely severe” supply chain snarls.
A surge in the number of coronavirus infections last month has forced Chinese authorities to reintroduce lockdown measures in Shanghai, where Tesla’s factory is based. The U.S. automaker previously said it plans to temporarily halt most of the production at that factory in the first two weeks of July to make upgrades.
A few weeks ago, Musk also said he plans to cut Tesla’s salaried workforce by 10% over the following couple of months, though the carmaker intends to raise the number of hourly employees. The billionaire said the newly-announced layoffs would affect roughly 3.5% of Tesla’s total workforce.
Musk said in April Tesla will still strive to produce 1.5 million cars in 2022 despite supply chain constraints, though he warned that buyers would face longer wait times for their cars.
Despite the supply chain issues, Tesla is still aiming to produce 1.5 million cars this year, Musk said in April, though he cautioned that customers face long wait times for their vehicles. Analysts expect Tesla’s share in the U.S. and global electric vehicle market to shrink but remain significant in the future as other manufacturers continue to double down on developing their own EVs.
As startups and legacy automakers offer more new electric vehicles, Tesla’s share of the global and domestic EV market is expected to decrease but remain substantial.
Conclusion
Tesla shares are trading below $700 again with some analysts seeing the potential for a deeper pullback as the company continues to struggle with the ramp of new factories in Germany and Texas. The EV maker also reported lower-than-expected number of EV deliveries for Q2, increasing the pressure on itself to outperform in the second half of the year.
