Tesla becomes the most profitable car manufacturer in the US after a record 2022

Another record quarter and another record year. This is how Tesla begins its message to shareholders with the results for the fourth quarter and for the whole of the year 2022. The company has increased its profit by almost 60% in the fourth quarter, up to 3,700 million dollars, and in the year as a whole, it has more than doubled its profits, up to 12,556 million, which will place it as the American car company with the highest profits, ahead of General Motors (GM) and Ford. GM, the rival to beat, announced at the end of the third quarter that it expected to end 2022 with a profit between 9.6 and 11.2 billion dollars.

The company led by Elon Musk achieved its first annual profits in 2020, with only 721 million, and multiplied them in 2021, up to 5,519 million. In 2022, revenues have grown by 51%, to 81,462 million. Although the gross margin on car sales has deteriorated somewhat, the company has been able to keep operating costs at bay, which has boosted profit. The company has also contained investments, with which its free cash flow increases by 51% and its net cash position grows to a record of more than 22,000 million.

Despite these results, the company is cautious about the future: “As we move towards 2023, we know that there are doubts about the short-term impact of an uncertain macroeconomic environment and, in particular, with the rise in interest rates . The Tesla team is used to challenges, given the culture needed to get the company to where it is today. In the short term, we are accelerating our cost reduction roadmap and moving towards higher production rates, while remaining focused on executing the next phase of our roadmap.

Tesla tries to appease fears about the price cuts that it is needing to undertake to start production, which will foreseeably further erode margins. In general, he explains, the average sales price of his cars has been on a downward trajectory for many years. “You need to improve affordability to become a multi-million vehicle producer,” he stresses.

He explains that while average revenue per vehicle halved between 2017 and 2022, operating margin steadily improved thanks to the introduction of lower-cost models, the construction of large, more efficient factories, lower vehicle costs, and the operating leverage. All in all, the gross margin has deteriorated especially in the fourth quarter, in which it has been 25.9%, compared to 30.6% a year earlier.

Up to two million vehicles

Sales slowed their exponential growth at the end of last year. In the fourth quarter, billing increased 37% year-on-year, a much lower rate than in previous quarters. “We plan to increase production as quickly as possible, in line with the 50% average annual growth target that we started setting at the beginning of 2021. In some years we will grow faster and in others slower, depending on a number of factors. factors. By 2023, we expect to stay ahead of the long-term goal of 50% constant annual growth, with around 1.8 million cars for that year.

In the conference with analysts, Elon Musk has gone further, pointing out that sales have skyrocketed with price cuts. “These price changes make a difference for the average consumer,” he said in his initial presentation and assured that so far this year “orders have almost doubled the rate of production.” In subsequent questions, he has pointed out that the company’s internal production potential is close to two million vehicles for this year. Of course, assuming that there are no problems in the supply chain or major external disturbances (“earthquakes, tsunamis, wars, pandemics,” he said). And he has assured that there would also be a demand to reach those two million cars sold, although he has qualified: “We do not commit to that.”

Tesla’s long-term goal is to reach 20 million vehicles by 2030, which would make it the clear world leader in sales. The firm manufactured 1.37 million cars in 2022 and those 1.8 million that it has set as a goal for 2023 imply a growth slightly above 30%. If the company says that it is still ahead of the target, it is because it accumulates previous years of very rapid growth. In addition, until now Tesla had a waiting list to sell its cars and its limit was what it was capable of producing. Since last year, however, he has found himself having unsold stocks piling up. It disappointed with the pace of deliveries in the fourth quarter, although it has been recovering from the stock market punishment it suffered as a result.

The company run by Elon Musk, in any case, lost almost two-thirds of its value in 2022. Analysts and investors warn that strong competition in electric cars will erode its market share. Tesla was once worth more than a trillion dollars, as much as all other car companies, despite making just over 1% of the world’s cars.

Musk has taken advantage of the conference with analysts to advertise Twitter as a great tool to increase sales of Tesla and those of any company that wants to advertise on the social network that he bought at the end of October of last year for about 44,000 million dollars and which it has run somewhat chaotically ever since.

The tycoon has been asked if his activity unleashed on Twitter, where he has taken right-wing stances and called for votes for the Republican Party, could scare away potential Tesla customers. “Let me check my account. Ok, I have 127 million followers. That suggests that I am reasonably popular, it could be that I am not popular with some, but for the majority, that number of followers speaks for itself, ”he replied.

The 50-year-old businessman put to a vote on the social network whether he should stop being the CEO of Twitter. Users told him to go away and he said he would when he found “someone stupid enough” to replace him. It’s been a little over a month and, apparently, he still can’t find it.