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.
Elon Musk predicts rapid recovery in vehicle production in China to drive strong growth in total output.
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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Audible alerts at the gate call out travellers trying to board earlier than they should
TUCSON, Ariz.—Passengers in Boarding Group 1 were filing onto American Airlines Flight 2721 to Dallas Friday when an ominous sound went off at Gate B11: dip-dip-dip-DOOP. The gate agent delivered the bad news. The passenger was in Group 4. She asked him to wait his turn.
The same sound—the last-gasp sound from AirPods running out of juice, or sad “Game Over” music for an old videogame—went off minutes later. Dip-dip-dip-DOOP.
“You’ll be boarding with Group 5, sir,” the agent said. Five more passengers were turned back before Group 2 was called.
American Airlines is cracking down on line jumpers. All major U.S. airlines do their best to maintain boarding order since priority boarding is a perk for frequent fliers , credit-card holders and big spenders, and is often available for purchase. But American is the first to develop an automated system that instantly flags offenders.
The airline is experimenting at gates in Tucson, Albuquerque, N.M., and Washington, D.C., as part of a broader upgrade to American’s boarding technology. The airline has tested the alerts on more than 4,500 flights this month and will expand to several more cities this year, with an eye to taking it systemwide if no major issues, such as slower boarding, arise at larger airports. The airline says early feedback from fliers and gate agents has been encouraging.
The idea for automated policing grew out of complaints from travellers fed up with line jumpers and the employees who feel their wrath. In particular, top-tier frequent fliers gripe about too many passengers in the first boarding group, says Preston Peterson, American’s managing director of customer experience.
Group 1 is reserved for travellers in first class, certain business-class tickets and American’s executive platinum status. Active duty military members with military I.D. are also allowed. Groups 2 and 3 are similarly elite.
“They’ve earned that [priority] boarding group and they want access to it,” Peterson says.
The biggest perks, of course: plenty of overhead bin space and no worries about the dreaded threat of gate-checking your bag.
The new system promises smoother boarding for passengers and gate agents. I flew to Tucson International Airport to try it out. I put the airline’s traditional boarding to the test at my departure gate in Phoenix. Could I slither into an earlier boarding group? I was in Group 4 but breezed right through with Group 2.
Gate agents tell me it’s hard to monitor passengers’ group numbers manually, big plane or small, especially with boarding-pass readers where travellers plunk their phones face down.
American isn’t telling passengers about the test before their flights, and that’s on purpose. It doesn’t want them to change their behaviour simply because they’re being watched.
Chad Vossen, a 46-year-old chief creative officer for a video-marketing company in Virginia, knew nothing of the test until he and a colleague tried to board in Group 6 instead of Group 8 for a flight to Phoenix. They had done it on other American flights and others, in hopes of avoiding gate-checking their camera equipment.
His first thought when the dip-dip-dip-DOOP went off: “Wow, that doesn’t sound good.”
Vossen says it triggered the sounds losers hear on “Hollywood Squares” or “ The Price is Right .” (American says the sound effects are generic videogame clips and is still testing different sounds.)
He stepped out of line and laughed about getting caught. Vossen says he sees the change mainly as a way to get travellers to pay up for priority boarding. He’s unlikely to pay, but says he will probably finally sign up for American’s loyalty program. Members get complimentary Group 6 boarding regardless of status. That’s one group ahead of regular Main Cabin customers without status.
Peterson, the American customer-experience executive, believes most passengers aren’t out to game the system.
“I think most people just see a line and go, ‘Oh, we’re boarding,’” he says.
About one in 10 passengers on American’s test flights have boarded out of order, the airline says. Not all want to cheat the system. Some are travel companions of those with better boarding positions. American’s policy allows them to board together if they’re on the same reservation but didn’t assign the same boarding group. (The alert still goes off, but the agent can easily override it.) And the airline says its system doesn’t flag pre-boarders, like those with wheelchairs.
Exceptions excluded, I counted as many as seven passengers on one flight boarding in the wrong group; on another, it was zero. That math no doubt changes at a busy hub like Chicago or Dallas. So does the potential for tension.
The passengers I saw seemed to take the ejection in stride, moving aside and waiting for their group. One even apologised to the gate agent.
The test is already having an impact beyond the walk of shame. Peterson says the airline has noticed some passengers jumping out of line after seeing fellow fliers turned away. He says he witnessed the same thing at a non-U.S. airline that began policing boarding groups.
Peterson’s ultimate goal: zero boarding group alerts. “I don’t want anyone to be dinged,” he says.
For now, passengers should expect a cacophony at American gates employing the new tech. Not all alerts will send you to the back of the line. Hear a slot-machine-like sound when you scan your boarding pass? You’re probably seated in an exit row.
Even if you get the dreaded you’re-in-the wrong-boarding-group alert, it could be a mistake. A passenger in Group 8 was taken aback Friday afternoon when it sounded on her flight to Phoenix.
“That did not sound good at all,” she said to the flight attendant.
“You failed at ‘Pac-Man,’” the agent joked.
She was in the right place. The agent hadn’t yet flipped the switch in the app to her group.
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