Tesla makes record profit, despite inflation, price cuts and Elon Musk’s chaotic leadership

Electric car maker Tesla has made record profits for 2022, despite inflation, price cuts to boost sales, and company boss Elon Musk’s erratic leadership.

The company said that, over the last quarter of 2022, it had seen record revenue, operating income and net profit due to price cuts and lower-cost models, outcomes that were better than predicted by analysts.

That helped it make record vehicle deliveries of 1.31 million last year, although production rose by almost half to 1.36 million vehicles.

Across 2022, revenue rose by half, to $US81.5 billion ($115 billion), while net profit more than doubled, to $US12.6 billion ($17.7 billion), and operating margins rose nearly 17 percent over the year.

“This margin expansion was achieved through the introduction of lower-cost models, build out of localized, more efficient factories, vehicle cost reduction and operating leverage,” Tesla said.

The company made $US3.7 billion ($5.2 billion) profit from October to December, up by almost two thirds from the December quarter in 2021, after quarterly revenue rose 37 percent, to $US24.3 billion ($34.2 billion).

That came despite slowing vehicle deliveries and COVID-19 shutdowns in China over the last few months of 2022, which squeezed fourth-quarter profit margins.

On a conference call to discuss the results, a restrained Mr. Musk praised the Tesla team for the record results which, he said, came despite “forced shutdowns, very high interest rates and many delivery challenges”.

“It was a fantastic year for Tesla, our best ever,” Mr. Musk said. “All these records were in the face of massive difficulties.”

Man walks by Tesla Model 3 sedans and Tesla Model X sport utility vehicle at a new Tesla showroom in Shanghai
A Tesla showroom in Shanghai, China. (Reuters)

The car maker cut prices in the US and China, its two biggest markets, by up to one-fifth on some models, with investors and analysts speculating the move reflected lower demand because of rising interest rates.

Mr. Musk addressed the concerns, saying that demand far exceeds production, and that Tesla had seen its strongest orders for January to date.

“A massive number of people want to buy a Tesla car but can’t afford it, but these price changes really make a difference for the average consumer,” he said.

The company expects to sell 1.8 million Tesla cars this year, although Mr. Musk went further and confidently predicted that 2 million cars could be sold, despite a probable recession and high inflation.

Some listeners were skeptical about that bullish prediction on Twitter.

Tesla also reassured investors that it had a handle on the uncertain economic environment, although it may not have a handle on Mr. Musk.

“As we progress in 2023, we know that there are questions about the near-term impact of an uncertain macroeconomic environment and, in particular, with rising interest rates,” the company said.

“The Tesla team is used to challenges, given the culture required to get the company where it is today.”


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