Tesla surprised by pace of “structural shift” to EVs, prepares for Model Y ramp

Tesla posted record earnings for the third quarter of 2021 well above analyst expectations, to meet a “structural shift” in demand for electric vehicles that continues to grow, even while production is fettered by the global chip shortage and other parts scarcity.

Tesla underlined the continuing difficulties ahead due to the parts shortages, saying although both its Berlin and Texas gigafactories are nearly ready to make the Model Y, ramping up production will be an altogether more challenging task.

“Due to parts shortages and logistics variability, we have not been able to run our factories at full capacity,” Tesla CFO Zachary Kirkhorn said on this morning’s earnings call (Australia time), taking the place of CEO Elon Musk who is stepping back from quarterly earnings calls.

“A variety of challenges, including semiconductor shortages, congestion at ports and rolling blackouts, have been impacting our ability to keep factories running at full speed,” the company wrote in its shareholder presentation.

“We believe our supply chain, engineering and production teams have been dealing with these global challenges with ingenuity, agility and flexibility that is unparalleled in the automotive industry. We would like to thank everyone who helps advance our mission.”

Kirkhorn reported that despite this it had doubled capacity year-on-year, and that although in many markets Tesla had needed to push prices up (contrary to Australia where a price drop saw the Model 3 drop under $60,000 before on-roads), demand was exceeding both production and price increases.

“Despite these increases in production and generally higher prices, our backlogs are continuing to grow and average customer wait times are extending,” he said, but added, “The only practical way to address this in the immediate term is to do everything we can to build more cars on our existing production lines, which is where we are focused.

Tesla’s ability to navigate the global semiconductor and parts supply chain shortages was addressed by Musk at the recent annual shareholders meeting, which in part saw Tesla rewrite software to integrate new chips, underlining its agility and innovation.

Reporting a record revenue of $US13.8 billion ($A18.3bn), the automaker also recorded a $US1.6 billion ($A2.13bn) third-quarter profit, up from $US331 million ($A440bn) a year ago. The results exceeded Wall Street projections, which predicted a US1.3 billion profit and $US13.6 billion in revenue.

The record revenue comes as Tesla delivered nearly 73 per cent more vehicles than the third quarter of 2020, thanks to an increase in sales of vehicles built in China, which is now home to Tesla’s largest auto plant by output.

However future growth will remain tied tightly to availability of parts and more importantly cells, Tesla said. Although its goal is to increase production by 50% annually to reach 20 million cars a year, Kirkhorn acknowledged that Tesla would need a model in every segment to achieve that.

No new models will be introduced whilst cell constraints still exist, he said.

In-house testing of its 4680 cells at Kato Road are still underway. “The 4680 in-house cell project continues to progress. We are producing an increasing number of battery packs for testing purposes, and so far, the test results meet our current expectations,” wrote Tesla.

And while its new factories are readying to make the Model Y which Tesla believes will be the best-selling car in the world, it does not expect to deliver cars made at either factory to customers before the end of 2021.

“It’s possible the stars align and things move quickly. It’s possible that we’re spending the bulk of next year working on ramping these factories. It’s just very hard to say,” Kirkhorn said.

According to Daniel Ives, technology analyst at Wedbush Securities, the impressive results are a reflection of automobile customers’ growing preference for electric vehicles.

“These delivery numbers, combined with this ‘impressive earnings beat,’ speaks to an EV demand trajectory that looks quite robust for Tesla heading into fourth quarter and 2022,” he wrote in a note to clients (via CNN).