Earnings at electric car maker Tesla fell less than expected last quarter, boosted by price hikes and the sale of three-quarters of the company’s bitcoin reserves.
The company released its quarterly financial results on Wednesday evening, showing that revenue fell, even as the company posted a higher profit than analysts had expected.
In a call to discuss the results with financial analysts, CEO Elon Musk said the company decided to sell about three-quarters of its bitcoin holdings in the quarter, which added $936 million in cash on its balance sheet.
Tesla began accepting bitcoin as payment for its products in early 2021, a major boost for the cryptocurrency. A few months later, the company said it was no longer acquiring bitcoins, but had no plans to sell what it had.
But the events of 2022 have caused a reversal.
Musk said the sale was made to increase liquidity as Tesla was unsure how long China’s COVID lockdown would last. Tesla has not sold any of its Dogecoin, which is another cryptocurrency that Musk has expressed support for.
“This shouldn’t be taken as a verdict on bitcoin,” he said, adding that Tesla was open to increasing its cryptocurrency holdings in the future.
Musk said macroeconomic uncertainty could impact demand for its electric vehicles, but when asked for details by an analyst, he said the company didn’t have a demand problem but a supply problem. production.
He said: “You can’t just raise prices arbitrarily high because you’re going over the affordability line and demand is falling off a cliff.”
“[Prices] are frankly at embarrassing levels. But we’ve also had a lot of supply chain and production shocks and we’ve got crazy inflation,” said Musk, who previously referred to “a super bad feeling” about the economy.
Tesla has raised prices several times over the past year. For example, the US price of its long-range Model Y version is now $65,990, up more than 30% since the start of 2021.
Musk said he expected inflation to start falling by the end of the year and most commodity prices to stabilize, which he hoped would allow Tesla to reduce prices slightly.
Tesla shares rose about 2% on Thursday. Shares are down about 40% from their November peak.
Chief Financial Officer Zachary Kirkhorn said Tesla is still striving to achieve 50% growth in shipments this year, adding that while the goal has become more difficult, “it is still possible with strong execution.”
Tesla’s Chinese factory ended the second quarter with a record monthly production level, after being forced to close due to COVID-19 related lockdowns.
Musk said new factories in Berlin and Texas aim to produce 5,000 cars a week by the end of the year, adding that Berlin was producing 1,000 cars a week in June. He had previously said that the new factories were “gigantic money ovens”.
Morgan Stanley analysts said in a report after Tesla’s earnings announcement that they saw “near-term margin headwinds due to [new] challenges of ramping up new production, especially in Berlin.”
Tesla executives acknowledged some lingering strain in older-generation chip supply, but said there were no major issues in chip and battery supply, barring unplanned shutdowns related to the COVID.
The electric vehicle maker posted adjusted earnings of $2.27 per share for the second quarter ended June, versus consensus analyst estimates of $1.81.
Automotive gross margin fell to 27.9%, down from a year earlier and a quarter earlier.
Total revenue fell to $16.93 billion from $18.76 billion a quarter earlier, ending its record revenue streak in recent quarters. Analysts had expected $17.10 billion, according to Refinitiv.