Tesla earnings rise as it weathers supply chain shocks

Tesla’s earnings were boosted by a jump in sales of regulatory credits in the latest quarter, adding an extra shine at a time when the US electric carmaker managed to withstand the worst of the supply chain shocks hitting the automotive industry.

The $679mn from sales of credits — more than double the preceding three months — enabled Tesla to beat Wall Street revenue expectations for the quarter by around $1bn, with an 81 per cent bounce from the previous year to nearly $18.8bn. Pro forma earnings per share rose to $3.22, from 95 cents a year before.

Wall Street had been expecting Tesla to report earnings of $2.26 a share on revenue of $17.8bn.

Tesla receives credits from some governments for producing more zero-emission vehicles than required to under local regulations, and can sell these on to other carmakers that produce too few. It has warned that sales of credits will fluctuate widely and eventually decline.

Tesla said that challenges in its supply chain “remained persistent”, with Covid-19 restrictions adding to the chip shortages that had weighed on the company over the past year.

Tesla’s Shanghai plant was closed for a number of days in March under local rules. With the company only now ramping up production again, most analysts expect the shutdown to have a bigger impact on second-quarter earnings.

The company said it had been able to offset some of the higher costs by increasing prices for its vehicles. As a result, its gross profit margin from automotive operations excluding the sale of regulatory credits — the best measure of its underlying auto business — hit 30 per cent, compared with the 29.3 per cent recorded in the final quarter of 2021.

Tesla shares rose nearly 4 per cent in after-market trading on Wednesday, on relief that the company had withstood the worst of the supply chain pressures, though that did not make up for the near-5 per cent decline in the stock earlier in the day. 

The quarterly figures were disclosed ahead of a call with Wall Street in which Elon Musk, chief executive officer, was expected to face questions about how his unsolicited bid for Twitter would affect his work at Tesla.

Tesla had already reported that new vehicle deliveries rose 68 per cent in the opening months of this year, even as sales declined at most of its rivals due to supply shortages.