Recently, Tesla announced its fourth quarter 2022 and full year 2022 financial results. Tesla said, “The fourth quarter of 2022 was a record breaking quarter and 2022 was a record setting year.” Tesla CEO Elon Musk even mentioned on a conference call that 2022 was the best year ever for Tesla on every level.
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Record revenue of $81.5 billion for the year
Tesla reported record revenue and net income: Q4 2022 revenue of $24.3 billion, up 37% from $17.7 billion in Q4 2021, and Q4 net income of $3.7 billion, with an operating margin of 16%; full-year revenue of $81.5 billion, up 51% from $53.8 billion in 2021; full-year net income of $12.6 billion Net income for the year was $12.6 billion, more than double that of the previous year.
Gross profit margin has been growing continuously in recent years, and at 25.6% in fiscal 2022, it is the highest gross profit margin Tesla has had in the last five years. 18.8%, 16.6%, 21% and 25.3% for fiscal 2018-2021, respectively. Tesla’s share price has risen 46 percent over the past month on the back of its latest earnings performance.
Tesla’s main revenue is from its automotive business, which will contribute $71.5 billion in revenue in fiscal 2022, up 51 percent from $47.2 billion in fiscal 2021. Automotive revenue for the fiscal year is 3.9 times higher than the $18.5 billion generated in 2018.
In terms of vehicle deliveries, Tesla delivered 405,000 vehicles in the fourth quarter of 2022 and 1.31 million vehicles for the full year, both record deliveries. In the past fiscal year, Tesla produced 1.37 million vehicles, up 47 percent from 930,000 in fiscal 2021.
Tesla’s vehicle production is primarily in the Model 3 / Y and Model S / X. The Model 3 / Y will produce 1.298 million units in fiscal 2022, up 43 percent from 906,000 units in fiscal 2021. Model Y is a compact sport utility vehicle with seating for up to seven adults.
Model S/X production is 71,000 units in fiscal 2022, up 192 percent from 24,000 units in fiscal 2021. The Model S is a four-door full-size sedan and the Model X is a midsize SUV with seating for up to seven adults, offering the company’s highest performance characteristics and longest range in a sedan and SUV, respectively.
Shanghai mega-factory takes the lead as it invests heavily in R&D
Investing heavily in R&D and continuously improving technology is an important asset for Tesla to achieve good market performance. In terms of R&D investment, Tesla will spend $3.075 billion (RMB 20.9 billion) on R&D in 2022, an 18.5% increase from the previous year. This is a 13-fold increase from $232 million (RMB 1.58 billion) a decade ago in 2013.
On the technology side, the pace of Tesla FSD updates increased dramatically in 2022, with the FSD beta system testing participating vehicles growing from 2,000 in 2021 to 160,000 in 2022, an 80-fold increase in just one year, and a total of 100 million miles (160 million kilometers) driven off the highway, officially putting it on the delivery fast track. Tesla FSD brought in $324 million in revenue in the fourth quarter, representing that the reliability, safety and convenience of Tesla’s Autopilot technology is winning the trust of users around the world and accelerating the coming era of autonomous driving.
On the smart car front, the past year has seen a record number of Tesla holiday-related software updates released on an annual basis. Recently, Tesla has integrated Apple Music into the player, and owners can add live view from the car’s camera to the mobile app when Dog or Sentry mode is activated.
On the latest Model S and Model X, owners can also use the powerful built-in gaming computer to play all the games in the Steam library, or use the wireless Bluetooth or wired USB gamepad to continue to launch games that have been paused on other devices.
Behind the impressive results, Tesla’s Shanghai mega-factory is a major player. Official figures show that Tesla will deliver a total of 1.31 million vehicles worldwide in 2022, an increase of 40 percent compared to 2021. The Shanghai Super Factory’s annual deliveries reached 710,000 units, more than half of Tesla’s global deliveries. Among them, the Model Y alone has delivered more than 450,000 units.
In its earnings report, Tesla noted that its Shanghai mega-factory continued to “successfully operate at near full capacity for several months” after reaching the milestone of rolling off the production line its one millionth vehicle in August 2022, and remains Tesla’s primary export center, supplying vehicles to most markets outside of North America.
Price reductions expected to follow
Despite its rapid growth and good performance, Tesla faces a number of challengers in the electric car space from Chinese car companies such as BYD, Nezha, Azera, Xiaopeng and RISO. Speaking about the electric car competitive landscape during the company’s earnings call, Elon Musk said that Tesla has great respect for Chinese car companies, which are extremely competitive in the world.
Tesla’s biggest competitor in China right now is BYD. In the new energy sport utility vehicle segment, Tesla’s Model Y ranks second in retail sales in China, behind BYD, and Tesla’s Model 3 model is fifth in retail sales of new energy cars in China in 2022, less than several models from BYD and other companies, according to the Automotive Market Research Branch of the China Automobile Dealers Association.
In early January 2023, BYD announced its 2022 annual sales, with cumulative sales of 1,863,500 new energy vehicles in 2022, up 208.64% year-on-year, and cumulative sales of 5,409 fuel vehicles, for a total of 1,868,500 vehicles. Because of BYD’s impact, Tesla failed to win the global new energy vehicle sales title for three years in a row.
In the face of macroeconomic pressure and increasing competition from other electric car manufacturers, Tesla has recently cut prices globally. Tesla’s official website shows that Tesla’s domestic models have been significantly reduced in price, with the Model 3 starting at 229,900 RMB and the Model Y starting at 259,900 RMB. Tesla also announced that the Model S and Model X are priced at RMB 789,900 and RMB 879,900 respectively. This price cut is just over two months after the price cut at the end of October last year.
This has stimulated the purchase demand to some extent. Elon Musk said that since January, Tesla “received the strongest orders ever,” with orders nearly twice as many as it produced during the same period. Tesla has been implementing a price-cutting strategy for years, halving the average price of Tesla’s electric vehicles between 2017 and 2022, but its operating margins continue to improve, thanks to factors such as the introduction of lower-cost models, more efficient local factories, lower vehicle costs and operating leverage.
Tesla’s price adjustments due to market demand have both advantages and disadvantages. The advantage is that more new customers are gained, and the disadvantage is that old Tesla owner, who are dissatisfied with Tesla’s behavior, have to some extent affected the company’s customer satisfaction.
Elon Musk stressed that “price changes have a significant impact on the average consumer and affordability is very important — Tesla’s goal has always been to make it affordable for as many people as possible.” This means that Tesla is expected to drop its price again and step into a broader market of demand.
For the 2023 car market, Elon Musk said, “While the overall car market may contract, [consumer demand for] Tesla will remain good.” He noted that market demand for Tesla’s electric vehicles is strong, even more so after the price adjustment, with orders reaching an all-time high in January 2023, almost double the factory’s capacity.
Tesla plans to deliver 1.8 million vehicles in 2023. With increased production at the company’s Berlin, Germany, and Austin, Texas, U.S., plants, Tesla’s total capacity has exceeded 450,000 vehicles per quarter, the earnings report noted. Tesla said the company will work to accelerate cost reductions, improve production efficiency, expand capacity, focus on cost efficiency, and improve functionality and reliability in the face of uncertainty in the macroeconomic environment and other adverse factors.
