Tesla's promotion idea of first high-end models and then Volkswagen models has also been borrowed by many new car-making forces. The improvement in its profit margin is mainly due to the scale effect brought about by the increase in delivery volume, which continues to release profit margins, and the increase in bicycle revenue brought about by price increases has alleviated the negative impact of some of the rising raw material and logistics costs.
Special Author of this journal Lin Huihui /Wen
After the U.S. stock market on April 20, Tesla announced its first quarter results for 2022. This financial report has many highlights, and all kinds exceed expectations.
Revenue increased 81% year-over-year to $18,756 million, higher than market expectations of $17,920 million. Revenue for the quarter of 2022 was close to full-year 2018 revenue ($21,461 million). Among them, the automotive business revenue was US$16.86 billion, an increase of 87% year-on-year.
Net profit was $3.318 billion, compared to $438 million in the same period last year, an increase of nearly seven times year-on-year, and the market expected $2.156 billion. Adjusted earnings per share were $3.22, better than the market expectation of $2.27.
Can Tesla continue to maintain such strong growth?
Gross margin crushes peers
The financial report disclosed that the gross profit margin of Tesla's automobile business was 32.9%, up 6.36% year-on-year, and the market estimate was 28.4%. This gross profit margin is also invincible in the industry. The general gross profit margin of the automotive industry is more than 10%, and some of the better can do it in the early 20%. For example, the domestic car-making new force "Wei Xiaoli", the ideal gross profit margin of the three with the highest gross profit margin in 2021 is 21.33%.
From the comparison of the operating profit margins of Tesla and traditional car companies, it can also be seen that Tesla's operating profit margin has entered a rapid growth mode since 2020, and by the fourth quarter of 2021, it has almost completed the surpassing of traditional car companies such as BMW, Daimler, Volkswagen, Ford, General Motors, Toyota, Honda, Hyundai, and Nissan. The first quarter continued to soar, and Tesla's earning power was highlighted.
The improvement of Tesla's profit margin is mainly due to the continuous release of profit margins due to the scale effect brought about by the increase in delivery volume, and the increase in bicycle revenue brought about by price increases has alleviated the negative impact of some of the rising raw material and logistics costs.
This performance was achieved in the quarter of multiple difficulties such as regional conflicts, the new crown epidemic, the soaring raw materials upstream of inflation, chip shortages, and poor logistics, which shows that Tesla's combat effectiveness is full.
Make every effort to expand production capacity
In terms of vehicle sales, Tesla's total sales were 310048 units, an increase of 68% year-on-year, of which Model 3&Y was the main force, with sales of 295,300 units, accounting for 95%. Tesla earlier used the Model S and Model X to label itself a high-end luxury car, and then quickly sank to launch the Model 3 and Model Y models, completely opening up the mass market. This kind of promotion idea of first high-end models and then Volkswagen models has also been borrowed by many new car-making forces.
It is worth mentioning that in the "Super Bowl" event in the United States on February 14, many car manufacturers put out car advertisements, Tesla did not put it, and the day after the event, Tesla's order volume increased significantly. It shows that the Tesla brand occupies the mind, and the leading effect is obvious.
In terms of production, production in the first quarter was 305407 units, up 69% year-on-year. Tesla's global inventory turnover days are only 3 days, which is further shorter than the 4 days in the previous quarter and much lower than the industry average cycle. Tesla's production target for 2022 is 1.5 million units, a 50 percent increase from 2021 and a 50 percent growth rate for years to come. The long-term goal is to achieve an annual production of 20 million vehicles.
At present, the annual production capacity of each plant is: 100,000 Model S&X units and Model 3&Y 500,000 units in the California plant; more than 450,000 Model 3&Y units in Shanghai (estimated to exceed 850,000 units in actual capacity in 2022); the new Berlin plant and the Texas plant are still in the capacity ramp-up period, with a planned capacity of 500,000 units, and the expected delivery volume will increase by an average of 50% per year in the next few years. However, due to the impact of the epidemic, the Shanghai plant stopped production for two days on March 16 and 17, and then continued to stop production on March 28, and then officially resumed work and production on April 19, losing nearly a month's output (estimated at 60,000-70,000 units). Customers who order now wait for the car for a very long time, and some orders will not be available until 2023. But there is news that Tesla will expand its new factory in Shanghai. The new plant is expected to produce Model 3 and Model Y models with an annual production capacity of 450,000 units. The expansion of the new plant will help Tesla increase the total production capacity of the Shanghai plant to 1 million vehicles per year.
Let's do a simple estimate of the valuation. In the first quarter of 2022, net profit was $3,318 million, excluding net profit from energy storage and services and other revenues, and net profit attributable to the automotive business was approximately $3.1 billion. If the sales volume of 310,000 vehicles in the first quarter is 10,000 US dollars, the corresponding average profit per vehicle is 10,000 US dollars; if the target production of 1.5 million vehicles is reached in 2022, the net profit can reach 15 billion US dollars, and Tesla's current market value is 950 billion US dollars, then the corresponding PE is 63. If Tesla can maintain a 50% growth rate in the next few years, then this valuation is not very expensive.
Other businesses and highlights
In addition to tesla's automotive business, Tesla also has energy products including solar roof SolarRoof and energy storage device Megapack, which can provide sustainable energy for electric vehicles and build a closed loop of "photovoltaic + energy storage + electric vehicles".
In the first quarter of 2022, energy storage deployments increased by 90% year-on-year to 846 MWh, largely due to the robust Powerwall deployment. With demand still well above capacity, growth is constrained by ongoing supply chain challenges. Tesla is expanding production at a dedicated Megapack factory to meet growing demand. Solar deployment fell by 48% in the first quarter to 48 MW. This reduction is due to delays in the import of some solar modules.
Tesla also laid out the upstream field of new energy vehicles, lithium prices soared, and signed a large order for lithium mine procurement. And self-produced part of the battery. The Texas Gigafactory, which went into operation in April, has delivered the first cars equipped with 4680 self-developed cells, one-piece die-cast front body and structural batteries, and the Berlin plant will also produce model Y in the future using structural battery packs from 4680 cells and non-structural battery packs from 2170 cells.
In addition, there is an auto insurance business that has expanded to three states: Colorado, Oregon and Virginia. This is a true UBI car insurance designed based on real time insurance. UBI (usage-based-insurance, insurance based on user behavior) car insurance is a new type of car insurance product designed according to the use time, mileage, driver habits and other information of the vehicle, and gives personalized pricing for different car owners.
In the future, it is autonomous driving and robots that may provide significant sources of profit.
Tesla's fully automatic assisted driving (FSD) with a pure vision solution began testing in 2019, and by April 2022, a total of 7 major version upgrades have been provided, driving ability, safety and comfort have made great progress, and FSD will be officially launched for North American customers at the end of 2022. Subsequent tesla will start the commercial operation of autonomous driving. The $25,000 model the company is planning will be the first to commercialize autonomous driving in the passenger car sector. The commercial operation of autonomous driving will greatly reduce logistics costs and increase the rate of material circulation in the whole society.
Musk also revealed information about Robotaxi and the robotics project on a conference call. In 2023, Tesla may release a Robotaxi product, with the goal of achieving mass production by 2024. Being able to provide consumers with the lowest cost of transportation per mile through full self-driving robotaxi and FSD will cost less than a subsidized bus or subway ride. Tesla also has high hopes for the Optimus robot project. Musk said the Optimus robotics project will be more valuable than the automotive business and FSD, and the importance of the project will be revealed in the coming years.
These other businesses, most of which are derived around the automotive industry, are not the main force of revenue now, but due to the large imagination space, they have a positive effect on the improvement of Tesla's overall valuation.
(Disclaimer: This article represents the personal views of the author only; the author declares that I hold the shares mentioned herein)
