Tesla posts record $1.1bn profit but warns of chip shortage

·5 min read
A giant dark grey building marked TESLA, about five or six storeys high and sprawling across a flat plain, looms over a Chinese road where an orange articulated lorry is passing by - Visual China Group/Getty
A giant dark grey building marked TESLA, about five or six storeys high and sprawling across a flat plain, looms over a Chinese road where an orange articulated lorry is passing by - Visual China Group/Getty

Tesla's quarterly profits have soared above $1bn (£726m) for the first time as it shrugged off troubles in China to double its revenue.

The electric vehicle maker led by Elon Musk made record profits of $1.1bn in the three months to the end of June on revenue of $12bn, compared to $104m in profit and $6bn revenue during the same period last year.

However, it warned that its growth in 2021 could be sorely tested by the ongoing microchip shortage, ongoing microchip shortage, which is projected to cost car makers about $110bn in lost revenue this year.

Chief executive Elon Musk said: "While we're making cars at full speed, the global chip shortage situation remains quite serious. For the rest of this year, our growth rate will be determined by the slowest part in our supply chain, and there are a wide range of chips that are at various times the slowest parts of the chain.

"The chip supply is fundamentally the limiting factor on our output. It is difficult for us to say how long this will last because this is out of our control... even achieving the output that we did achieve was only due to an immense effort from people within Tesla."

He added that it was "remarkable" Tesla did not go bankrupt before reaching mass production, unlike several other electric vehicle start-ups, but suggested that it could still happen in future.

Tesla built 206,421 cars during the quarter compared to 82,272 in the same period last year, with deliveries rising from 90,891 to 201,304. Mr Musk confirmed that it was on track to begin "limited" production in its new "gigafactories" in Berlin, Germany and Austin, Texas this year.

The percentage of Tesla's revenue that came from selling emissions credits to other carmakers, which has been controversial in the past, also fell from 50pc in the first three months of this year to 30pc.

Shares rose by 2.8pc in after-hours trading, climbing to $677 before paring gains.

'It's amazing we didn't go bankrupt – everyone else did'

Mr Musk, who spoke from Tesla's unfinished factory in Austin, said the chip shortage had caused "many calls at midnight or 1am" as it scrambled for silicon. At one point, he said, it had to swap in alternative chips and then rewrite the software to run on them "in a matter of weeks" to keep up production.

He said: "I'm fond of saying that prototypes are easy and production is hard. And arguably the really remarkable thing that Tesla's done is not to make an electric car, or to be a car start-up, because there have been hundreds of car startups in the United States.

"The thing that's remarkable is that Tesla didn't go bankrupt in reaching volume production. That's the amazing part, because everyone else did. They all thought the prototype or the idea was the hard part, and it is not. It is trivial by comparison with actual production...

"The seeds of defeat are sown on the day of victory, and we must be careful that we do not do that."

Unfortunate rivals include Faraday Future, whose founder declared personal bankruptcy in 2019; Fisker Automotive, which went bust in 2013; and Lordstown Motors, whose chief executive and chief financial officer resigned in June after it admitted that it might not survive the next year as a "going concern".

He did not address sales in China, where Tesla has suffered repeated turbulence this year. Analysts predict it will sell 40pc of its cars there by 2022, but it does not say what proportion of its revenue comes from the country.

According to the Chinese Passenger Car Association, Tesla's Chinese domestic sales fell from 35,478 in March to 11,671 in April after a series of consumer protests against alleged safety errors. They only partly recovered to 21,936 in May, despite electric vehicle sales surging by 177pc since the same time in 2020.

In June, Tesla was forced to issue software updates to about 285,000 Model 3 and Model Y cars in the country, comprising almost all the vehicles made in its Shanghai factory, due to errors with their cruise control system.

"China demand is a key driver for the long-term Tesla growth story, and the company must play nice in the sandbox with Beijing around safety issues," said Dan Ives of Wedbush Securities in a note last month.

Asked about plans to make Tesla's charging stations compatible with other electric vehicle brands, Mr Musk took a dig at Apple, which has been accused of using its app store to suppress competition.

"Our goal is to support the advent of sustainable energy," Mr Musk said. "It is not to create a walled garden and use that to bludgeon our competitors, which is sometimes used by some companies." He then theatrically coughed the word "Apple!"

He also lamented Tesla's struggles to hire talented manufacturing staff, saying: "I really encourage more people to get involved in manufacturing... the US has an over-allocation of talent in finance and law, which is both a riticism and a compliment.

"I'm not saying we shouldn't have people in finance in law; I'm just saying maybe we have too many smart people in those arenas."

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