Tesla’s second quarter earnings hurt by supply chain issues and Bitcoin

Tesla said on Wednesday that second-quarter profit fell by nearly a third from the first quarter as deliveries slowed due to shutdowns and raw material shortages at the automaker’s Shanghai factory.

Profit for the quarter was $2.3 billion, Tesla said, compared with $3.3 billion in the first quarter, which was a record. Sales fell to $16.9 billion from $18.8 billion in the first quarter.

The automaker was also hurt by a sharp drop in the price of Bitcoin. Tesla said in early 2021 that it had invested $1.5 billion in the cryptocurrency. The company said Wednesday that it had sold about 75 percent of Bitcoin by the end of June.

Compared to the second quarter of 2021, the result almost doubled. And earnings in the quarter exceeded analyst estimates. But because Tesla is a fast-growing company, its quarter-to-quarter progress, or lack thereof, is closely watched by investors.

Tesla dominates the global market for electric vehicles and is growing, while traditional car manufacturers such as Toyota and General Motors are recording steep declines in sales. But the last quarter was bumpy.

Tesla’s vehicle deliveries from April to June fell 18 percent from the first three months of the year, an unusual decline for a company that has enjoyed solid quarter-on-quarter gains in recent years. (Deliveries were up 26 per cent from the previous year.)

In China, which accounts for around 40 percent of Tesla’s sales, the Shanghai factory has been plagued by shutdowns related to the pandemic and shortages of important parts and materials. Tesla has not been able to increase production at new factories in Austin, Texas, and near Berlin as planned.

“It’s been hell in the supply chain,” Elon Musk, Tesla’s chief executive, said on a conference call Wednesday.

He told interviewers from a company fan club last month that the Austin and Berlin plants were “money ovens” that cost the company billions of dollars while producing few vehicles. Getting them increased and restoring the Shanghai factory to normal operations is Tesla’s top priority, he said.

Tesla said production in Shanghai picked up again in June and that factories in Berlin and Austin were making progress. “We are focused on a record second half of 2022,” Tesla said in its earnings presentation.

The market for electric cars is becoming more competitive, and traditional car manufacturers are eroding Tesla’s lead. Hyundai, Kia and Ford Motor have taken significant market shares, while Tesla has lost ground in the US. Tesla had a 66 percent share of the American electric car market at the end of the second quarter, according to figures prepared by Kelley Blue Book, down from 78 percent in the fourth quarter of 2021.

Tesla’s problems are largely short-term and profits should improve in the coming months, Laura Hoy, an equity analyst at investment firm Hargreaves Lansdown, said in an email. But she expressed concern about Tesla’s exposure to Bitcoin.

“The bitcoin losses point to an important part of the Tesla investment case — its eccentric owner,” Hoy said. “While Musk’s impressive innovation has served the company well, his personal style is beginning to raise governance questions.”

Musk said Tesla had sold its Bitcoin holdings to increase cash support in light of the problems in Shanghai. “This should not be taken as a judgment on Bitcoin,” he said on Wednesday. Tesla has not sold its holdings of another cryptocurrency, Dogecoin, he said.

Tesla had $18.3 billion in cash and cash equivalents during the quarter, according to the company.

Cryptocurrency is a “sideshow” and “not something we think about much,” Musk said.

“The fundamental good thing about Tesla, the reason we’re doing this, my primary motivation,” he said, “is to make the day of sustainable energy come sooner.”