Upwallstreet
July 21, 2023
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On Wednesday after the bell, the EV King Tesla Inc (NASDAQ: TSLA) posted an all-time high quarterly revenue, but price cuts and incentives thinned its margins. A rising automotive parts star whose solar-powered tonneau covers and remote power system are on the horizon, Worksport Ltd (NASDAQ: WKSP) just announced an eagerly awaited production update.
Worksport Announces An Eagerly Anticipated Operational Development Update
With its first assembly line now completed and primed for action, the Company is on track to start production in just three weeks. This is the first of a total of five assembly lines due for completion. With each successive line, Worksport will be expanding its capacit, strengthening its positioning and ability to meet the rising demand. CEO Steven Rossi also noted that the launch of subsequent lines will be done in a speedier manner as this milestone is much more than an operational update but rather proof of the company’s commitment to quality, innovation, and growth. With its intellectual portfolio and upcoming Solis solar-powered tonneau cover and its remote power storage COR, Worksport is poised to unlock substantial value to its shareholders, customers and the EV industry as a whole.
Tesla’s Quarterly Highlights
During its second quarter, Tesla made $24.93 billion in revenue, topping Refinitiv’s consensus estimate of $24.47 billion. However, the incentives and discounts that boosted demand melted the operating margin to 9.6%, the lowest for at least the last five quarters. The total gross margin was also low at 18.2% due to a mix of lower pricing and the production ramp up, including its in-house battery cells. Earlier this month, Tesla revealed it delivered 466,140 EVs while producing 479,700 of them, with these two figures being the closes approximation of its sales.
In its statement, Tesla management insisted that the operating margin is still healthy as it is being maintained with ongoing cost reduction initiatives, strong performance in energy and services units, as well as ramped up production at the EV maker’s Germany and Tesla facilities that entered the picture last year.
Speaking of revenues, Tesla’s core EV business expanded 46% YoY to $21.27 billion, increasing 6.5% sequentially. But it was less than the 83% rise in EVs sold which confirms that Tesla’s strategy of lowering prices has boosted demand. These figures exclude the impact of sale of regulatory credits.
Energy generation and storage brought $1.51 billion to the revenue table, rising 74% YoY. As for services and other revenue, including fees for ‘out-of-warranty’ repairs, this segment expanded 47% to $2.15 billion as more of its EVs had hit the road.
GAAP net income rose 20% YoY as it amounted to $2.70 billion adjusted 91 cents per share on the strength of non-core income, topping Refinitiv’s consensus estimate of 82 cents per share. On the other hand, operating income dropped 3% YoY to 2.40 billion with research and development costs rising from Q1’s $771 million to $943 million as Tesla races to the forefront of AI development, kicking off production of its Dojo super computers.
Why Was The Market So Displeased With Tesla?
The initial report didn’t destabilize the stock price which actually began to drop during the earnings call and therefore, based on what Tesla CEO Elon Musk said, or more precisely, failed to say. Although the Cybertruck is in production, the delivery dates are still unknown, along with other information. Musk did provide some specifications such as that the Cybertruck is going to include plenty of “new technology,” as it will contain 10,000 “unique parts and processes”. The only time-related data of the sci-fi electric pickup is that high volumes will happen next year, while the first candidates are still due for delivery this year.
On a less bright note, Tesla executives also warned during the call that vehicle production will slow down during the undergoing quarter due to significant factory upgrades and summer shutdowns, causing the stock to drop 5% after hours.
Tesla is still aiming to deliver 1.8 million EVs this year, which translates to a 37% YoY rise.
Dojo
Musk announced that Tesla will be committing more than $1 billion on developing its supercomputer for AI machine learning and computer vision training purposes. In simple words, this is another way in which Tesla will be using technology to enhance the EV experience of its users, upgrading its software and adding new features to its driver assistance system.
Musk Is Not Giving Up On FSD
Among many of his promises, Musk promised a Full Self-Driving car back in 2016. Although he still didn’t deliver it, he did mention that Tesla is focused on developing this technology for the U.S. market, saying that he believes Tesla will end this year being better than human. Along with sharing its charging network, Musk also disclosed that Tesla is open to sharing its full self-driving technology, and that it is already in early licensing discussions with a major automotive brand.
Tesla shares rose 136% year to Wednesday’s close, showing Musk’s decision to open Tesla’s charging network to other automakers has helped make a turnaround from last year’s 65% value drop.
