By Amy, Tesla Investor | Comply with her on Twitter: @SF___Tahoe

Tesla introduced one other file quarter and file 12 months yesterday. Tesla’s This autumn ’22 earnings have been a beat each on EPS and income.

The numbers:

• EPS (non-GAAP): $1.19 vs. $1.10 est.

• EPS (GAAP): $1.07 vs. $0.98 est.

• Income: $24.318B vs. $23.6B est.

• Automotive Gross Margin: 25.9% (v.s. 26.4% est.)

• $3.687 GAAP web revenue

Tesla as soon as once more executed higher than anticipated. Additionally of significance was the 2023 steering. There have been warnings within the steering in regards to the unsure nature of the macro setting. Tesla reaffirmed ~50% YoY development on a multi-year horizon (beginning with 2021 numbers) however tempered expectations by guiding to 1.8 million autos in 2023 (permits for a lower than “calm” macro setting). That is lower than 50% YoY however aligns with the long-term development goal. Notably, Tesla is taking part in Wall Avenue’s recreation, decreasing its inner aim of two million automobiles (they’ve sufficient provide and demand) to 1.8 million automobiles to handle expectations. Musk famous [if there was] a extreme recession, money is king. He needs to be cautious about utilizing money. Tesla is in a powerful place with simply $44M in debt and $22B in money.

Demand

Demand issues have been addressed each for auto and vitality merchandise. Auto orders from the start of the 12 months are on the best price ever, most likely 2x manufacturing. In truth, Tesla raised their costs barely for the Mannequin Y. Tesla plans to develop auto manufacturing as quick as attainable. Continued deal with Tesla being the very best producer will maintain its aggressive benefit. Shopper curiosity and demand for vitality are excessive.

Margins

Margin issues have been partially addressed as nicely. Tesla had growing manufacturing efficiencies within the quarter. Tesla CFO Zach Kirkhorn mentioned Tesla is bettering quantity whereas bettering overhead efficiencies. Tesla is attacking each space of price and redesigning its provide chain. Tesla didn’t present particular steering on margins, stating there’s numerous uncertainty. However Kirkhorn did word they’re hoping to remain above an auto gross margin of 20% and ASP of $47,000.

Managing to Max Working Margin

Kirkhorn mentioned Tesla is now maximizing working margin as different areas develop into extra vital, significantly vitality. My take: Not is auto revenue margin and deliveries king. Now gross margins are. There are ramifications in the best way Tesla is run shifting ahead. Auto used to have the ability to steal sources and provides from different departments. For instance, through the Mannequin 3 ramp, all staff that would assist did. So, in my view, it is a change from the previous and de-emphasizes autos shifting ahead. It additionally reduces the significance of excessive auto margins. Elon Musk famous that retail traders perceive the price of software program gross sales.

Auto is now one element. Inside sources will possible be deployed based mostly on contribution to gross margin. This is part of a shift to ramping vitality, not simply auto. Vitality is affirmed to have outsize development for the following a number of years. This additionally makes room for companies like FSD, insurance coverage, and others. Tesla shouldn’t be useful resource constrained. It’s notable that no particular provide constraints have been talked about (previous points with pc chips appear resolved), and it was affirmed there are sufficient battery elements to ramp vitality and auto.

TESLA AUTO

CyberTruck

CyberTruck is on observe for manufacturing mid-summer, with quantity manufacturing in 2024. Tesla is at present putting in manufacturing tools and have produced beta autos. GigaTexas has constructed one among 4 strains. They’re commissioning and putting in the opposite three. CyberTruck can have FSD {Hardware} 4.

Gen 3 Platform

Elon Musk is already shifting into the long run when the remainder of us are trying on the previous. First feedback on the Gen 3 platform might be made on Investor Day. New efficiencies have been talked about in drivetrains—bettering price of products offered (COGS) by design, not simply provide price financial savings) and battery cells, each of which might be required to supply two Gen 3 Platform autos for the price of one Mannequin 3.

Business Autos

There might be a brand new manufacturing facility for Tesla Semi in Nevada. Given IRA incentives for business autos, Musk was requested about Tesla’s plans for business autos exterior of the Semi however didn’t go into particulars. In fact….

Tesla Insurance coverage

Tesla Insurance coverage gained’t be damaged out individually on financials. Kirkhorn indicated it was price a few $300 million run price. Insurance coverage is rising at 20% per quarter (rising quicker than autos). Tesla Insurance coverage improves the price of possession for customers and offers a suggestions loop for engineering on the prices of repairs.

FSD

FSD is now launched to virtually 400,000 folks within the US and Canada. There was no particular info on FSD take charges: Musk mentioned enthusiasm elevated with every launch. FSD {Hardware} 4 is a big improve. It is going to improve FSD from 200-300x to 500-600x higher than a human driver. Musk famous it wouldn’t be economically possible to improve prospects from HW3 to HW4. FSD income recognition is 2 elements: Absolutely recognizing EAP on the level of sale versus incremental recognition of FSD, the place solely a portion is acknowledged, and the remainder is deferred income.

AI

Elon mentioned Tesla is an AI firm. FSD interface is probably the most environment friendly interface pc on the earth. Tesla has Dojo, a world-class AI expertise becoming a member of Tesla, Optimus, and a automobile robotic on wheels. He doesn’t see anybody near Tesla in fixing real-world AI. AI is an order of magnitude potential and will have a 10x improve in Tesla’s market cap. Elon Musk mentioned he was speaking with the Tesla AI/FSD crew the earlier night time to find out which different FSD resolution was closest to Tesla’s. Tesla views itself as having a commanding FSD lead. Elon mentioned he “can’t see the second-place crew with a telescope!”

Tesla Vitality

Tesla Vitality is the very best ever for each utility and client merchandise. Tesla Vitality noticed file development, and it’s accelerating. MegaPacks are anticipated to develop at a quicker price than Auto. Vitality storage deployments elevated by 152% YoY in This autumn to 2.5 GWh, for a complete deployment of 6.5 GWh in 2022. Tesla can also be ramping manufacturing at Lathrop with the MegaPack manufacturing facility as a result of MegaPack demand exceeds manufacturing. Tesla is looking for the quickest path to 1,000 GWh productions. Tesla is fastidiously enthusiastic about extra MegaPack factories. There are attainable manufacturing facility bulletins later this 12 months and subsequent. Tesla made strides towards Battery Day’s aim of bettering battery effectivity. They’re now making use of Tesla’s manufacturing aggressive power to battery cells. Tesla famous the small footprint of the introduced manufacturing facility in Nevada for 100MWh vs. the present area to supply a lot much less MWh, which is indicative of battery cell manufacturing advances.

IRA Credit

Elon mentioned long-term IRA battery credit are most likely gigantic however not important for this 12 months as a result of battery manufacturing is being break up with Panasonic. Kirkhorn mentioned IRA can have $150-250 million credit per quarter this 12 months, rising quarter over quarter. Tesla might be shifting extra battery manufacturing onshore, which is already the plan and can use credit to enhance affordability.

My Take

It was a superb earnings name. Tesla is managing for sustained development of its Vitality and Auto divisions. Tesla is ready to climate a extreme recession if crucial and constantly drives to scale back prices by way of manufacturing efficiencies, redesigning the availability chain, and vertically integrating, the place crucial. Allusions have been made to new, not yet-known pipeline merchandise. Tesla has elevated its revenue from each greenback spent and elevated its leverage from Q421 vs. Q422. Web earnings have been +59% on a +37% improve in web income, a 22% distinction. Its factories are evermore environment friendly, manufacturing is streamlined, the design was improved, and provide prices have been lowered. Plus, Tesla is ramping up Vitality, FSD, and its different companies.