Tesla’s (TSLA) stock price has gained around ~10% in the last two days after the automaker announced its quarterly earnings for Q2 2022 on Wednesday. The financial results posted by Tesla regained investor confidence in the company.
Tesla stock closed at $742.50 on Wednesday 20th July and on Friday 22nd July at market close, the share price went up to $816.73 (~10% up).
Tesla bought around $1.5 billion worth of Bitcoin (BTC) cryptocurrency last year in February. But the automaker decided to get rid of 75% of it this year. Although Elon Musk had confidence in the future of cryptocurrency, the recent market crashes and downfall of Bitcoin pushed the automaker to sell most of its Bitcoin holdings.
When Tesla bought Bitcoin last year, the price of a single Bitcoin was around $46,485, and as Tesla sold them this quarter the price is fluctuating between $19K to $23K during the last month. Tesla incurred a big loss here but saved itself mostly from any further damage in the near future.
In my opinion, there are 3 factors that regained investor confidence in Tesla (TSLA) — Elon Musk’s Twitter distraction is over, the Bitcoin sell-off, and better financial results for Q2 2022 even in the wake of the Shanghai factory closures and supply chain issues.
Q2 2022 Financial Results
Comparing the current quarter to the previous year’s Q2 2021, Tesla has made significant progress despite the challenges and lower number of deliveries compared to the several previous quarters. Automotive revenues grew from 10,206 million to 14,602 million (43%) from Q2 2021 to Q2 2022 respectively.
Q2 2021 was also the first quarter when Tesla did not need the regulator credits to be profitable. And in Q2 2022, those credits have further shrunk down by 3% YoY.
Tesla’s Automotive gross profit has also grown by 41% YoY (Q2 2021 v.s Q2 2022). Total gross profit including the sustainable energy sector grew by 47% YoY. All of these positive indicators pumped the TSLA stock by 10% before the weekend close.
Q2 2022 Earnings Call
Although Tesla CEO Elon Musk said that he won’t be joining the company’s future earnings calls but he is back for opening remarks and Q&A sessions for the last few quarters again.
Musk once again pressed that Tesla has been back to full production since June 2022, not just full production, June was the record month for production at both Shanghai and Fremont car factories.
“We’ve had many 30,000-car weeks already. I think a 40,000-car week is within reach by the end of this year,” Elon Musk said.
Tesla is not just aiming for 50% more production compared to 2021 (around 1.5 million vehicles) but is also in pursuit of 40K cars a week production at all of its 4 factories around the globe (Fremont, Giga Shanghai, Giga Berlin, Giga Texas).
Giga Berlin reached a production rate of 1,000 cars per week in June, and Giga Texas is catching up as well. So, 30K cars per week from only Shanghai and Fremont and ramping up Giga Berlin and Giga Texas towards the end of this year will enable Tesla to consistently output 40,000 electric cars per week.
Giga Texas equipped to produce Model Y with the legacy battery pack
Tesla shared one interesting piece of information in the Q2 2022 report that Giga Texas is now equipped to produce Model Ys with the legacy battery pack in addition to its default production of Model Y with the structural battery pack.
In Texas, we have added flexibility to produce vehicles with either a structural battery pack or the legacy battery pack. The next generation of 4680 battery cell machinery has been installed in Texas and is in the process of commissioning. Factory output in Texas continues to grow.Tesla Q2 2022 report (full PDF below)
Tesla has adopted this strategy to increase the production numbers at Giga Texas. Since the automaker is also not restrained with the 2170 battery cell supply, Model Ys manufactured with the legacy battery pack will be easier and faster to produce.
4680 cell supply is currently limited so it will hinder the production rate at Giga Texas until this barrier is overcome by Tesla. However, Drew Baglino, SVP, Powertrain & Energy Engineering at Tesla is positive that the company will be able to ramp up 4680 cell production at both Texas and Berlin this year.
Tesla has installed the 2nd generation of 4680 cell production at Giga Texas to increase production efficiency and speed.
Other Key Takeaways
- Tesla is not expecting any major supply chain issues in the 2nd half of 2022 (2H22).
- Inflation-related price hikes will most probably not be as big as in the first half of 2022 (1H22).
- Tesla has expanded the FSD Beta early access program to over 100,000 users.
- Tesla cars have been driven over 35 million miles using FSD Beta, Tesla’s self-driving software in the beta-testing phase. This is most probably more miles and self-driving data gathered by all other competing companies combined.
- Tesla has made many advancements in manufacturing, especially the Giga Castings and the latest 9,000-ton Cybertruck Giga Casting machine.
- Adopting the Giga Casting manufacturing model, Tesla has reduced the number of body welding robots by 70% per unit of capacity in Giga Texas and Giga Berlin. This reduction of robots reduces the size of the body shop by around three times (-3X).
- Giga Castings are also lighter, cheaper, and have a superior noise vibration and harshness, said Elon Musk during his opening remarks.
- A new seat belt behavior has been introduced which is based on Tesla Vision. If a collision is imminent, the seat belts in a Tesla vehicle will automatically start tightening even before the crash.
- More exciting products are in the pipeline that Tesla and Elon Musk are not yet going to talk about.
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