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After the U.S. stock market on January 26, Eastern Time, Tesla (TSLA. US) once again posted better fiscal 2021 fiscal fourth-quarter results than Wall Street expected.
Overall performance analysis
According to the earnings report, the company's Q4 revenue was $17.72 billion, up 65% year-on-year, better than the market's general expectation of $16.2 billion. Under Non-GAAP accounting standards, net income attributable to common shareholders was $2.88 billion, an increase of approximately 219% year-over-year, and earnings per diluted share were $2.54, better than expected at $2.26. Gross margin was 27.4%, up from 26.6% in the previous quarter.
The company's Q4 R&D expenses were 740 million yuan, accounting for 4.2% of revenue, and sales management and general expenses were 1.49 billion yuan, accounting for 8.4% of revenue. Overall operating expenses were $2.23 billion, or 12.6 percent of revenue, the highest quarter of 2021. The company said it will continue to innovate to reduce manufacturing and operating costs, and over time, it expects hardware-related profits to grow along with an acceleration in software-related profits.
As of December 31, 2021, the company generated cash flow from operating activities of $4.585 billion, and cash equivalents and restricted cash at the end of the period was $18.144 billion, with abundant cash reserves, and management said that it laid the financial foundation for the company's business activities such as mergers and acquisitions and expansion.
Although this is a financial report that exceeded expectations, the degree of exceeding expectations is not large. Compared with the degree of exceeding expectations in the previous two quarters, the performance momentum reflected in this financial report is somewhat insufficient. Among them, the gross profit margin increased by only 8.2/0.8 percentage points year-on-year/month-on-quarter, slightly exceeding market expectations. In the previous quarters, benefiting from the increase in the gross profit margin of automobile sales, the company's gross profit margin increased rapidly. With the gross profit margin of automobile sales increasing to more than 30%, the upside space is limited, and the gross profit margin of the energy storage and service business has not been able to achieve rapid improvement, resulting in the company's gross profit margin improvement speed is weak, and it is expected that the company's gross profit margin improvement rate in 2022 will be relatively stable.
Business performance and analysis
In the fourth quarter, both the automotive business and the service business achieved significant improvements. Among them, the automobile business increased by 71.4% year-on-year, and the service business increased by 56.9% year-on-year. The energy storage business alone is underperformed due to capacity constraints.
Automotive business: Strong demand Deliveries are expected to exceed 1.4 million units in 2022
The Tesla automotive business is divided into two parts: car sales and car rental. Among them, the Q4 revenue of automobile sales was 15.339 billion US dollars, accounting for 96% of the automobile business. Car rental revenue of $628 million, while currently accounting for a smaller share, is booming, up 124% year-over-year.
Tesla's full-year deliveries in 2021 increased by 87% year-on-year to 936172 vehicles, of which the fourth quarter exceeded the 300,000-vehicle mark for the first time, breaking the delivery record. Tesla warned that supply chain shortages, which have led to lower sales at most other major automakers, will also squeeze Tesla. "With supply chains becoming the main limiting factory, our own factories have been operating below capacity for several consecutive quarters, which is likely to continue into 2022." On the earnings call, Tesla reiterated its target of 50% annual production growth, but Musk said that there will be no new models in 2022, and the main task is still to expand production capacity, and it is expected that the annual production growth rate will exceed this figure. The 50% annual growth rate means that Tesla is expected to deliver more than 1.4 million vehicles in 2022, but the most realistic expectation is between 1.5 million and 1.6 million units.
To show confidence in its capacity, Tesla elaborated on a performance call about several of its factories.
Regarding the plants that have already been put into operation, the Shanghai plant plays an important role in the company's global strategy, with a wholesale volume of more than 170,000 units in the fourth quarter, accounting for 58% of the total global delivery. Tesla said it would continue to increase production at its Shanghai plant. According to the data, Tesla's Shanghai factory wholesale data exceeds 70,000 units, and the linear conversion has a production capacity of 850,000 vehicles / year, and it is possible to impact millions of production in 2022. Its Fremont plant in California, although it has only a capacity of 600,000 vehicles per year and is currently in a state of overload production, still has the potential to increase production.
Regarding the new factory, Tesla said that its Berlin factory and Austin factory have already started production last quarter, but have not yet officially mass production and delivery. Among them, the Berlin plant has postponed the mass production schedule due to environmental protection issues, and now has the capacity to put into production and has begun to accept Model Y bookings. But because the plant is still waiting to obtain local manufacturing permits, Tesla has not been able to tell the Berlin factory when it will officially mass production. The Austin plant is initially operational and is currently in testing equipment, and Tesla plans to deliver the first Model Y by the end of the first quarter of 2022. Tesla said it hopes the plant will be able to deliver model Y to two-thirds of the eastern United States, a move that can significantly reduce its logistics costs and further improve profit margins.
At the same time, Tesla also revealed that in order to expand production capacity, the company will continue to look for new locations to build new factories in 2022. While it was unable to announce anything about the call, the company will announce the location of the new plant until the end of 2022.
Energy storage business: poor performance is still in its infancy
Tesla's energy storage business Q4 revenue of $688 million, down 8.5% year-on-year and down 14.6% sequentially. Although driven by Megaack's strong strength, its installed capacity of energy storage products in 2021 increased by 32% year-on-year, but due to production capacity, revenue growth is difficult.
Tesla announced in September that tesla's Lathrop MegaFactory in California officially started to produce the megapack for energy storage equipment, a move that has played a positive role in releasing the backlog of orders. Demand for Megapack is strong, and Musk revealed in an earnings call in Q2 last year that the capacity of Megapack products by the end of 2022 has been snapped up.
It is also worth mentioning that Tesla has changed the battery used by Megapack to a lithium iron phosphate battery to reduce production costs and push up sales. Therefore, if Tesla can solve the capacity problem and push up sales, it can achieve a volume increase in this business.
Services and other businesses: gross margins turn positive Higher auto sales may strongly drive their profits
In the fourth quarter of 2021, Tesla's service business revenue was $1.064 billion, and the gross profit margin turned into profit to achieve the best performance in the past five years, breaking through the break-even. Since the service business is based on stock cars, as Tesla's cumulative sales increase, the revenue of this business will increase accordingly.
Sales of Tesla's used cars also remained strong, and profits from other businesses such as services, boutiques and accessories sales also improved. The company has been driving the progress of its own insurance business since launching its first insurance program in 2019. In the context of the sharp rise in the premium of new energy vehicles, it has become a trend for car companies to intervene in the insurance business at a deeper level. On the conference call, the company's management said that the company currently launches Tesla insurance products in 5 U.S. states, and its internal goal is to make 80% of U.S. Tesla owners available in insurance by the end of 2022. At that time, attention may be turned to the European market and work in Europe.
Other points of concern
Fully autonomous driving (FSD) will be launched this year
In the fourth quarter of 2021, its beta software for FSD continued to be promoted, with a total of seven update pushes released. Its FSD-equipped test vehicles also increased from a few thousand in the third quarter to more than 60,000. Recently, the Model 3 and Model Y, which use pure visual autonomous driver assistance solutions, received the highest safety ratings in the U.S. Highway Safety Insurance Association crash test and received a single score of "excellent" for collision avoidance. Musk believes that FSD will be much safer compared to human drivers. Musk said on a conference call that "I would be shocked if we can't achieve full autonomous driving this year that's safer than humans," stressing that FSD will be rolled out within this year.
Power batteries are its core competitive advantage
In terms of battery technology, Tesla has further solved the cost problem through technological innovation and other means, greatly reducing the cost of a bicycle to about $36,000, and the reduction of battery cost has become one of the key factors to achieve this.
Tesla said: "Large castings, structural battery packs, 4680 batteries and other aspects will help us continue to reduce product costs." Musk confirmed that the Model Y produced at Tesla's Austin plant will be the first to be equipped with a structural battery pack and a revolutionary 4680 battery cell, which will be delivered this quarter. The company's management revealed that the 4680 battery is not the limit of its 2022 production plan, and its battery production exceeded market expectations. It is reported that this week there are media reports that Panasonic plans to invest 700 million US dollars in A Japanese factory in Goshan Prefecture, Japan to produce 4680 batteries for the company.
The new model is expected to be available next year
Tesla will focus on increasing production in 2022 and make it clear that it will not launch new models this year. For investors, this is not a surprise. But Tesla said it made progress on industrial production of cybercruck and plans to start production of the truck at the Austin plant after the Model Y. Musk said that if this year's production capacity is optimistic, it will be ready to put into production next year models such as the electric semi-trailer Semi and the Roadster, a sports car.
Stock price movements
At the beginning of 2022, Tesla's stock price has been under pressure, and in the case of the recent hit on technology stocks, Tesla has suffered a large number of sell-offs, showing a downward trend. Although the financial report exceeded market expectations, there were no surprises.
The market believes that more of the company's market value support comes from valuation, even if the company's stock price has recently pulled back, but there is still a premium, there is still further downside, and the current macro environment is not friendly to highly valued stocks, so the entry risk is larger.
Investor enthusiasm is low, and in the short term the stock price may depend more on the reaction of the overall market after the Fed meeting, and the stock's share price has risen weakly. After the earnings report, the stock fell nearly 6% after hours, and then recovered some of the loss. As of press time, Tesla was down 0.96% at $928.4.
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