After announcing the results of the first quarter of 2022, Tesla's TSLA.US trillion-dollar market value and price-earnings ratio of more than 100 times seem to have a basis for taking root.
Since 2019, Tesla's cars have been driving fast, and the net profit attributable to non-accounting standard shareholders has reached $7.64 billion by 2021, 3.11 times that of the same period last year, while tesla's market value has increased by 61% in one year.
At the rate of profit growth, its 100x price-to-earnings ratio valuation does not seem so far away.
This accounted for the "King of Ning" Ningde era (300750. SZ) electric vehicle producers with 10% revenue for the full year 2021 set several records in the first quarter of 2022, despite pressure from supply chain and capacity issues and rising raw material costs.
The first quarter of 2022 recorded a number of new highs
BYD, which has just announced the suspension of production of fuel vehicles and fully switched to new energy vehicles, 002594. SZ, 01211.HK) announced a profit forecast, expecting net profit attributable to the mother in the first quarter of 2022 to increase by 174%-300%, reaching 650 million yuan to 950 million yuan, which is said to be expected to surpass Tesla.
Tesla showed no sign of weakness. In the first quarter of 2022, the company's revenue, electric vehicle delivery, operating profit, etc. all hit new highs, and the operating profit margin reached more than 19%.
In the first quarter of 2022, Tesla's total production increased by 69.35% year-on-year and 0.14% quarter-on-quarter (or due to capacity bottlenecks) to 305,400 units; sales increased by 67.77% year-on-year and 0.47% quarter-on-quarter to 310,000 units, a new high.
Driven by higher deliveries, auto sales revenue (excluding regulatory credits) increased 89.50% year-over-year (or 3.25% quarter-on-quarter) to $15.514 billion, and total revenue increased 80.54% year-on-year to $18.756 billion, a record high.
In the first quarter of 2022, Tesla's gross profit margin on automobile sales further increased by 6.78 percentage points year-on-year (2.29 percentage points on a quarterly basis) to 32.60%, as shown in the chart below. This was mainly due to the increase in vehicle deliveries, the increase in average selling prices, and the fact that the cost of bicycles did not rise due to inflationary pressures.
During the period, R&D expenses increased by 29.88% year-on-year, sales and administrative expenses decreased by 6.06% year-on-year, coupled with increased average selling prices, decreased bicycle costs, lower share-for-salary expenses, and increased sales of regulatory points, offsetting the impact of raw materials, commodities, logistics and other costs and operating expenses, Tesla's quarterly operating profit increased by 506.57% year-on-year to $3.603 billion, and the operating profit margin further increased to 19.21%. This is an increase of 13.49 percentage points over the same period last year and an increase of 4.46 percentage points over the previous quarter.
Net profit attributable to non-accounting standard shareholders for the first quarter of 2022 increased by 255.13% year-on-year, or 29.77% quarter-on-quarter, to US$3.736 billion, and its profit performance continued to reach a new high, no less than THATD.
Tesla's quarterly performance is certainly good, but I believe that everyone is more concerned about whether such excellent results can be sustained, which is the key to whether it can be worthy of a hundred times valuation.
The following author will analyze the four pain points that Tesla is currently facing: 1) production capacity; 2) the relationship between upstream supply capacity and cost; 3) new products; and 4) competition.
Capacity expansion is at the heart of decision-making
We are "busy" | Tesla in "Caihua Focus"! Don't push new cars this year, what are the highlights of the future? As mentioned in the article, Tesla does not plan to launch new cars in 2022, but focuses on capacity expansion and efficiency improvement, after all, supply exceeds demand, capacity bottlenecks and supply chain problems are problems that need to be overcome urgently.
As can be seen from the chart below, Tesla's deliveries are basically on par with or even higher than production, and climbing quarter by quarter, but by Q1 2022, deliveries and production seem to be almost the same as the previous quarter. It should be noted that this does not mean that Tesla's sales have peaked, but because of the bottleneck of production capacity.
From the data provided, it is not difficult to deduce that Tesla's delivery volume for the last 12 months of March 2022 was 1.0613 million units, and the production volume was 1.0555 million units, which is obviously not catching up with the delivery volume.
In the first quarter of 2022, Tesla's Fremont plant in the United States can produce 100,000 Model S/X and 500,000 Model 3/Y per year, while the Shanghai factory that produces Model 3/Y has a production capacity of more than 450,000 units, with a combined production capacity of about 1.05 million units, which shows that the capacity utilization rate has been tightened.
In April this year (after the first quarter of 2022 performance reporting period), the Shanghai Tesla Gigafactory stopped production due to the epidemic, or affected its production progress. Fortunately, the Texas Gigafactory and the Berlin Gigafactory have recently been put into operation, which is expected to solve the urgent need for their production capacity.
The Berlin Gigafactory, which has started operations in March 2022, will produce cars that will be equipped with 2170 battery unstructured battery packs. In the future, the Berlin Gigafactory will be able to produce a structural battery pack equipped with 4680 batteries and a non-structural battery pack Model Y equipped with 2170 batteries.
The Texas Gigafactory, which will begin delivery of the Model Y in April 2022, is the largest Tesla Gigafactory to date and will undertake mass production and assembly of the 4680 battery.
According to Tesla's data, the factory will adopt an integrated die-casting process, the body production time is only 45 seconds, applied to the Model Y front and rear bottom plate production process, a large reduction in welding and other links, the number of welding parts reduced to 1, optimize manufacturing efficiency and cost, effectively improve driving safety.
See the figure below, the Model 3 body structure on the left is composed of 171 metal components, while the Texas-made Model Y body structure on the right has only 2 metal components, missing 1600 welding processes.
At its Cyber Rodeo event at its Texas plant, Tesla delivered the first vehicles fitted with 4680 batteries, integrating battery packs into the front and rear of the vehicle. Later this year, Tesla said, the Texas Gigafactory will be able to produce model Ys that use 4680 battery-structured battery packs and 2170 battery non-structural battery packs.
On the other hand, the Shanghai plant has resumed work recently. In response to questions from institutional investors, Musk expects that despite missing a few weeks of production, the weekly production of the Shanghai Gigafactory in Q2 is expected to set a new record, meaning that Q2 production will be roughly similar to Q1, perhaps slightly lower (but also slightly higher). Seasons 3 and 4 will improve significantly.
Musk's most optimistic guess is that Tesla production is expected to reach more than 1.5 million vehicles this year.
It is worth noting that Tesla's Berlin and Texas factories currently only produce Model Y.
Musk's answer to whether the two new plants will produce model 3s in the future is that the new plants are appropriate to avoid the interference of complexity and diversity first, so the Berlin and Texas factories are currently focused on the Model Y. From factory production to mass production of high-quality vehicles, it usually takes 9-12 months to climb the hill, and it is currently progressing well, but it usually takes 12 months to increase weekly production to the level of 5,000 vehicles.
Based on this estimate, the combined capacity of the two new plants in the next 12 months is expected to reach 520,000 vehicles, and then merge the production capacity of the Fremont and Shanghai Super Factories, the total production capacity may be about 1.57 million units, which is the end of the period, and it is still a little tight to meet Musk's optimistic production forecast.
Supply chain and cost issues
Limiting capacity may not be entirely a factory problem, but largely related to the supply chain.
Tesla mentioned in response to investors' questions that the supply chain challenges continue, in addition to the chip shortage, the recent recurrence of the epidemic has also affected its supply chain and factory operations. In addition, the price of some raw materials has several times doubled in recent months, which, combined with the impact of inflation on its costs, has driven Tesla to raise the pricing of its products.
Musk said: "We achieved record earnings in this quarter, and the price increase seems unreasonable at this time." It should be noted that the order delivery time for some of our models is already scheduled until next year, so our current adjustment to the price of the booked vehicle actually takes into account the increase in the original supplier and raw materials for the next 6-12 months, because the vehicle booked today is likely to be delivered until next year.
Chief Financial Officer (CFO) Zack Kirkhorn added: "We expect raw materials to account for about 10%-15% of the cost, raw material prices will still rise in the coming quarters, and overall costs will also increase. The increase increased in Q1, and the increase in Q2 is expected to remain slightly higher than that.
In the short term, these factors may not have directly affected Tesla, because it has a contract with suppliers, but as the contract expires, Tesla will need to renegotiate with suppliers for new (rising) prices. According to its expectations, the upstream cost increase will be reflected in the re-entered supply contract, thus affecting Tesla's profitability, which is the reason why Tesla preemptively raised prices.
The author noted that in the 2021 results of the CATL era, the company mentioned that the supply framework agreement signed with Tesla in June 2021 stipulated that the company would supply products to Tesla between 2022 and 2025.
From the announcement of the Ningde era, it can be seen that tesla purchased lithium-ion power batteries from the Ningde era, the specific procurement situation Tesla is determined by order, and the final sales amount is subject to the actual settlement of the purchase order issued by Tesla, which may mean that Tesla's purchase price will depend on the market price at that time - only to ensure supply, not to ensure price stability.
In 2021, catheter times and Tesla confirmed the sales revenue of lithium-ion power battery supply of 13.039 billion yuan, equivalent to 10% of its total revenue.
From the data disclosed by CATL, it is not difficult to see that Tesla is its first major customer, and the supply contract with CATL is Tesla and Tesla (Shanghai), or it means that CATL supplies Tesla Shanghai factory or Tesla overseas factory.
According to the news released by CATL on April 6, its first overseas factory in Thuringia, Germany, officially obtained a cell production license, the plant plans a total investment of 1.8 billion euros, planned production capacity of 14 MWh, is currently in the equipment installation stage, for the first batch of batteries can be rolled off the production line before the end of 2022 for the final sprint, it is unknown whether it can support Tesla's Berlin factory.
The author believes that Tesla's recent price increase has been accepted by consumers, which shows that the company is fully capable of passing on the rising costs to consumers.
The question may not be whether the rise in material costs is acceptable, but whether Tesla's upstream suppliers can provide production support for Tesla in a timely manner to alleviate the bottleneck pressure of its production.
Therefore, Tesla's optimization of the integrated molding production process, the innovation of battery solutions, and diversified supply (to reduce the risk of relying on a single supplier) should be conducive to the formation of its competitive advantage. From this point of view, Tesla's profitability should be maintained.
Tesla's new product
Tesla's 2022 will be a year of production capacity, not products. However, research and development of new products and technologies, such as the aforementioned processes and batteries, has been underway.
According to Musk, Cybertruck will be officially mass-produced next year; Semi electric semi-trailer trucks, Roadsters, etc. will also be mass-produced after Cyberruck; Tesla Bot will also be launched.
The Autonomous Driving System (FSD) (trial version) is moving at full speed: there will be seven software upgrades in 2022. Tesla has launched an FSD trial version to some customers in Canada in March 2022, and plans to release the FSD trial version to FSD (fully autonomous driving) customers in the United States by the end of this year.
The Robotaxi, which has a high degree of intelligent driving capability, may be mass-produced in 2024.
All in all, after next year, Tesla will have a large number of new products officially launched, or can provide it with a new source of revenue.
Competition will intensify
New forces Weilai (NIO.US), Xiaopeng (XPEV.US) and ideal (LI.US), new forces zero run, Nezha and other electric vehicle brands, are surging forward.
On the other hand, traditional car companies have also made the transformation of new energy vehicles, in addition to BYD's "all-green" determination, Tesla's local competitors in the United States, Ford (FORD.US) and General Motors (GM.US), are looking forward to the growth of new energy vehicles to make up for the decline of the traditional automobile business.
In the first quarter of 2022, Ford's total sales in the United States fell 17.11% year-on-year to 432,100 units, but electric vehicle sales reached a record high, up 37.9% year-on-year.
General Motors, the world's largest automaker, recently announced an expanded partnership with Honda to develop an economical (price less than $30,000, about 200,000 yuan) electric vehicle, which will be equipped with Ultium battery technology developed by GM, which is scheduled to be launched in 2027.
In addition, GM and Honda will explore future opportunities for cooperation in electric vehicle battery technology and the construction of 2 million electric vehicle production capacity by 2025.
In recent years, GM and Honda have been working closely together. In 2020, GM and Honda plan to jointly develop two electric vehicles, including the Honda Prologue, which will launch in early 2024, and the acura's first electric SUV. The further consolidation of cooperation between the two major manufacturers may form a powerful impact.
Therefore, in the face of the menacing transformation of traditional automobiles and new forces, Tesla must not only compete in vehicle sales, services, experience, etc., but also compete in the supply chain - the rise in electric vehicle production means that the demand for raw materials will also increase sharply, which will naturally squeeze Tesla's resource supply.
epilogue
At the opening of the Texas Gigafactory, Musk said that Tesla expects global product deliveries to grow by more than 50% per year, leading Tesla to 20% of the global automotive market share.
However, it is important to note that the company's ability to achieve growth will depend on its equipment production capacity, operational efficiency, and the capacity and stability of its supply chain. At present, the production of Tesla's own factory has not reached production for many consecutive quarters, and the supply chain is the main constraint, and it is expected that the supply chain problem will continue throughout 2022.
Judging from the current situation that Tesla products are in short supply, short-term supply chain problems should not affect its profitability.
However, in the long run, with the intensification of industry competition and the further upgrading of the squeeze on resources, whether Tesla can maintain its competitive advantage will depend on its own process and product innovation capabilities.
The road knows the horsepower, Tesla's trillion body value is still to be verified.
Author: Mao Ting