Tesla races ahead of rising raw material costs on price hikes

SAN FRANCISCO – Tesla Inc surged past Wall Street estimates for quarterly revenue and profit on Wednesday (April 20), as the electric carmaker prices in response to inflation, offsetting the impact of a Shanghai factory shutdown.

Tesla has been an outlier since the pandemic outbreak, posting record deliveries and earnings for several quarters when rivals wrestling with global supply chain snarls rolled out production halts.

Shares of Tesla rose 4% after the close of regular trading.

“Price increases are nicely exceeding cost inflation,” said Craig Irwin at Roth Capital. “Chinese production issues seem well managed, and we expect Austin and Berlin to make up the slack from Shanghai’s 19-day outage.”

Tesla its prices in China, the United States and other countries, after CEO Elon Musk said in March the US electric carmaker was facing significant inflationary pressure in raw materials and logistics amid the crisis in Ukraine.

“Our own factories have been running below capacity for several quarters as supply chain became the main limiting factor, which is likely to continue through the rest of 2022,” Tesla said in a statement.

Tesla said chip shortages and recent Covid-19 outbreaks have been weighing on its supply chain and factory operations, while prices of some raw materials have increased multiple-fold in recent months.

The world’s most valuable automaker said revenue was US$18.8 billion in the first quarter ended March 31, versus estimates of US$17.8 billion, according to IBES data from Refinitiv. This is up 81% from a year earlier.

Sales of its regulatory credit to other automakers jumped 31% to US$679 million in the first quarter from a year earlier, helping boost revenue and profits. Its earnings per share was US$3.22, beatings analysts’ estimates of US$2.26.

Tesla shut down its Chinese factory for about three weeks before resuming production gradually this week. “Although limited production has recently restarted, we continue to monitor the situation closely,” Tesla said on Wednesday.

Musk offered to buy Twitter last week, sparking concerns about him being distracted from the electric carmaker at a time when it is ramping up production at new factories in Berlin and Texas.

The new factories will be key to meeting demand and reducing reliance on its China factory, its biggest one, which is slowly recovering from a plant shutdown. There are concerns that Musk may sell some Tesla or borrow against additional Tesla shares to finance his US$43 billion bid to buy Twitter.

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