Tesla Posts Record US$3.3 Billion Quarterly Profit
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Tesla Posts Record US$3.3 Billion Quarterly Profit

Elon Musk predicts rapid recovery in vehicle production in China to drive strong growth in total output.

Thu, Apr 21, 2022 1:45pmGrey Clock 4 min

Tesla Inc. posted a greater than sevenfold increase in first-quarter profit to reach a record as Chief Executive Elon Musk said the company could boost vehicle production more than expected this year despite supply-chain bottlenecks and disruptions in China.

Mr. Musk on Wednesday said Tesla likely would produce more than 1.5 million vehicles in 2022, up some 60% over last year. The company’s long-term goal is to increase vehicle deliveries by an average of 50% annually. Production in China would recover strongly, he said.

The world’s largest car company by value is recovering from a shutdown at its Shanghai factory, where work was suspended March 28 because of strict government measures meant to slow the spread of Covid-19. Tesla said it lost about a month of production from the shutdown.

“Shanghai is coming back with a vengeance,” Mr. Musk said as the company reported that sales in the first three months of the year had jumped roughly 80% from a year earlier to $18.76 billion, generating a record profit of US$3.32 billion. That topped the previous high of $2.3 billion set in the preceding quarter. Results beat Wall Street’s expectations for both sales and profit.

However, factories are likely to continue operating below capacity through 2022, due largely to supply chain bottlenecks, Tesla said.

Tesla delivered around 310,000 vehicles globally in the first quarter, up from 184,877 a year earlier and 308,650 in the fourth quarter.

Tesla shares closed down nearly 5% Wednesday, before advancing more than 4% in late trading after the company posted its quarterly results, which were buoyed by an uptick in revenue from regulatory credits.

The company sells the credits to rival auto makers that need them to comply with emissions-related rules. Such sales brought in $679 million in the most recent quarter aided by a one-time benefit, up from $518 million a year earlier. Credit sales have long been critical to Tesla’s bottom line, though they have dwindled in recent quarters. The company has said it would become less reliant on them.

Mr. Musk joined the Tesla earnings call almost a week after making a $43 billion nonbinding bid to take over Twitter Inc. The social-media company adopted a so-called poison pill a day after Mr. Musk made his offer. The move makes it harder for any investor to purchase 15% or more of the company’s stock. Mr. Musk, on the Tesla call, didn’t address the Twitter situation.

In Shanghai, Tesla had about a week’s worth of vehicle-parts inventory at its factory and was working with local authorities and suppliers to address logistics problems, local government-run Shanghai Television reported.

Shanghai-area manufacturers have had trouble getting parts delivered, because China’s travel restrictions have made it difficult for trucks to enter the region, analysts have said.

Customers, meanwhile, are having to wait longer to get behind the wheel of a new Tesla. As of March, U.S. buyers could expect to wait roughly eight months for a new long-range Model Y compact sport-utility vehicle, one of Tesla’s most popular models, according to Bernstein Research. Delivery lead times historically have been around two to eight weeks domestically, the firm said.

Tesla in recent weeks delivered its first Model Ys made at its new plants in Germany and Texas. Mr. Musk has said localizing production would improve Tesla’s economics in the long run.

The auto maker has been charging more for its cars amid inflation and persistent supply-chain bottlenecks. The cost of one configuration of the Model Y jumped 30% in the year ended in March, according to Bernstein. Price increases in China haven’t been as extreme, ranging between 5% and 11% in the same period, depending on the model, Bernstein data show.

In some cases, Mr. Musk said, suppliers are requesting 20% to 30% more for parts than they did last year. “I think the official numbers actually understate the true magnitude of inflation,” Mr. Musk said.

Tesla signaled software sales would become an increasingly important profit driver. By the end of the year, it said it expects an advanced driver-assistance feature designed to help vehicles navigate cities to be available to everyone in the U.S. who has purchased Tesla’s “Full Self-Driving” package. Tesla has been gradually releasing trial versions of the technology, which more than 100,000 people are testing, Mr. Musk said in a recent TED interview. The system, which costs $12,000 upfront, doesn’t make vehicles autonomous.

Mr. Musk on Wednesday provided additional details about the dedicated robotaxi he teased earlier this month, saying he hopes the vehicle, which won’t have a steering wheel or pedals, will enter volume production in 2024. He said a trip in such a vehicle would cost less than a bus ticket.

Tesla is working to open the company’s fast-charging network in the U.S. to electric vehicles made by other manufacturers, Senior Vice President Andrew Baglino said. The company launched a pilot program last year that allows non-Tesla drivers in parts of Europe to use its charging network.

The company also is taking steps to enable more of its customers to insure their vehicles through Tesla. It’s aiming for 80% of U.S. customers to have access to a Tesla insurance product by the end of the year, Chief Financial Officer Zachary Kirkhorn said.

The auto maker, like many in the industry, is also contending with soaring costs for the materials used in the rechargeable batteries that power electric vehicles. Raw materials account for 80% of the cost of a lithium-ion battery, up from 40% in 2015, according to Benchmark Mineral Intelligence, which tracks the battery supply chain.

Mr. Musk, who tweeted earlier this month that lithium prices had “gone to insane levels,” revisited the idea that Tesla might get into the business of mining and refining the metal and urged others to do so as well.

Tesla has flirted with that prospect for years and even neared deals in the middle of last decade to buy lithium mines in the U.S. and Argentina, according to a person familiar with the matter. But the company didn’t follow through with those acquisitions as it gave priority to production of its Model 3 sedan, the person said. In the years since, the balance of power has shifted toward suppliers as car companies from Ford Motor Co. and Volkswagen AG to newcomer Rivian Automotive Inc. scramble to secure the materials they need to meet ambitious electric-vehicle production targets. Ford and General Motors Co. are scheduled to report earnings next week. Rivian’s quarterly results are due in May.

Lithium carbonate prices averaged around $60,800 per metric ton in March, up roughly $50,000 from a year earlier, Benchmark data show.

—Raffaele Huang contributed to this article.


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What’s still keeping American workers out of the office?

At a time when restaurants, planes and concert arenas are packed to the rafters, office buildings remain half full. Thinly populated cubicles and hallways are straining downtown economies and, bosses say, fragmenting corporate cultures as workers lose a sense of engagement.

Yet workers say high costs, caregiving duties, long commutes and days still scheduled full of Zooms are keeping them at home at least part of the time, along with a lingering sense that they’re able to do their jobs competently from anywhere. More than a dozen workers interviewed by The Wall Street Journal say they can’t envision returning to a five-day office routine, even if they’re missing career development or winding up on the company layoff list.

Managers say they will renew the push to get employees back into offices later this year. The share of companies planning to keep office attendance voluntary, rather than mandatory, is dropping, according to a survey released in May of more than 200 corporate real-estate executives conducted by property-services firm CBRE, one of the largest managers of U.S. office space.

A battle of wills could be ahead. The gap between what employees and bosses want remains wide, with bosses expecting in-person collaboration and workers loath to forgo flexibility, according to monthly surveys of worker sentiment maintained by Nicholas Bloom, a Stanford University economist who studies remote work.

Escalating expenses

One reason workers say they’re reluctant to return is money. Some who have lost remote-work privileges said they are spending hundreds, or in some cases thousands, of dollars each month on meals, commutes and child care.

One supercommuter who treks to her Manhattan job from her home in Philadelphia negotiated a two-day-a-week limit to her New York office time this year. Otherwise, she said she could easily spend $10,000 a year on Amtrak tickets if she commuted five days a week.

Christos Berger, a 25-year-old mortgage-loan assistant who lives outside Washington, D.C., estimates she spends $2,100 on child care and $450 on gas monthly now that she is working up to three days a week in the office.

Berger and her husband juggled parenting duties when they were fully remote. The cost of office life has her contemplating a big ask: clearance to work from home full time.

“Companies are pushing you to be available at night, be available on weekends,” she said, adding that she feels employers aren’t taking into account parents’ need for family time.

Rachel Cottam, a 31-year-old head of content for a tech company, works full time from her home near Salt Lake City, making the occasional out-of-town trip to headquarters. She used to be a high-school teacher, spending weekdays in the classroom. Back then, she and her husband spent $100 a week on child care and $70 a week on gas. Now they save that money. She even let her car insurance company know she no longer commutes and they knocked $5 a month off the bill.

Friends who have been recalled to offices tell Cottam about the added cost of coffee, lunch and beauty supplies. They also talk about the emotional cost they feel from losing work flexibility.

“For them, it feels like this great ‘future of work’ they’ve been gifted is suddenly ripped away,” she said.

Parent trade-offs

If pandemic-era flexible schedules go away, a huge number of parents will drop out of the workforce, workers say.

When Meghan Skornia, a 36-year-old urban planner and married mother of an 18-month-old son, was looking for a new job last year, she weeded out job openings with strict in-office policies. Were she given such mandates, she said, she would consider becoming an independent consultant.

The firm in Portland, Ore., where Skornia now works requests one day a week in the office, but doesn’t dictate which day. The arrangement lets her spend time with her son and juggle her job duties, she said. “If I were in the office five days a week, I wouldn’t really ever see my son, except for weekends.”

Emotional labor

For some, coming into the office means donning a mask to fit in.

Kenneth Thomas, 42, said he left his investment-firm job in the summer of 2021 when the company insisted that workers return to the office full time. Thomas, who describes himself as a 6-foot-2 Black man, said managing how he was perceived—not slipping into slang or inadvertently appearing threatening through body language—made the office workday exhausting. He said that other professionals of colour have told him they feel similarly isolated at work.

“When I was working from home, it freed up so much of my mental bandwidth,” he said. His current job, treasurer of a green-energy company, allows him to work remotely two or three days a week.

Lost productivity

The longer the commute, the less likely workers are to return to offices.

Ryan Koch, a Berkeley, Calif., resident, went to his San Francisco office two days a week as required late last year, but then he let his attendance slide, because commuting to an office felt pointless. “I’m doing the same video calls that I can be doing at home,” he said.

Koch, who works in sales, said his nonattendance wasn’t noted so long as his numbers were good. When Koch and other colleagues were unable to meet sales quotas in recent weeks, they were laid off. Ignoring the in-office requirement probably didn’t help, he said, adding he hopes to land a new hybrid role where he goes in one or two days.

Jess Goodwin, a 36-year-old media-marketing professional, turned down an offer to go from freelance to full time earlier this year because the role required office time and no change in pay.

Goodwin said a manager “made it really clear that this is what they’re mandating right now and it could change in the future to ‘you have to be back in five days a week.’”

Goodwin, who lives in Brooklyn, N.Y., calculated that subway commutes to Midtown Manhattan would consume more than 150 hours annually, in addition to time spent getting ready for work.

Goodwin’s holding out for a better offer. She said she would consider a hybrid position if it came with a generous package and good commute, adding: “And I would also probably need something in my contract being like, ‘We’re not going to increase the number of days you have to come in.’”


Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’

Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual

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