Tesla hits record profit despite parts shortage, ship delays

Tesla hits record profit despite parts shortage, ship delays
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Updated 21 October 2021

Tesla hits record profit despite parts shortage, ship delays

Tesla hits record profit despite parts shortage, ship delays

DETROIT: Record electric vehicle sales last summer amid a shortage of computer chips and other materials propelled Tesla Inc. to the biggest quarterly net earnings in its history.
The company said Wednesday that it made $1.62 billion in the third quarter, beating the old record of $1.14 billion set in the second quarter of this year. The profit was nearly five times larger than the $331 million Tesla made in the same quarter a year ago.
Revenue of $13.76 billion from July through September also set a record, but it fell short of Wall Street expectations of just over $14 billion, according to FactSet.
Excluding special items such as stock-based compensation, Palo Alto, California-based Tesla made $1.86 per share, beating analyst estimates of $1.62. CEO Elon Musk has said he's moving the headquarters to Austin, Texas, the dateline of Wednesday's earnings release.
Some of the quarterly profit, though, came from selling regulatory credits to other automakers. Tesla made $279 million on credits during the quarter.
"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 said in a statement to shareholders.
Earlier this month Tesla said it delivered a record 241,300 electric vehicles in the third quarter even as it wrestled with the shortages that have hit the entire auto industry. Most automakers reported sales declines in the U.S. last quarter due to chip and other shortages, including General Motors and Ford.
Previously, Musk has said Tesla kept its manufacturing lines running largely by finding chips from alternate suppliers and then scrambling to rewrite some of the software in its cars to ensure all the technology remained compatible.
Third-quarter sales rose 72% over the 140,000 deliveries Tesla made for the same period a year ago.
So far this year, Tesla has sold around 627,300 vehicles. That puts it on pace to soundly beat last year’s total of 499,550.
While sales grew in the third quarter, the average sales price fell 6% because Tesla is selling more less-expensive Models 3 and Y and fewer pricier Models S and X.
Tesla also took an impairment charge of $51 million due to a decline in value of its Bitcoin holdings.
Musk didn't appear on this quarter's conference call with with analysts and investors. He said previously that he would show up only when he had something important to say.
That left Chief Financial Officer Zachary Kirkhorn and Vice President of Vehicle Engineering Lars Moravy to answer questions.
Kirkhorn said the company was able to hit an operating margin — how much it makes pretax after variable production costs — of just under 15%.
But Kirkhorn said Tesla may face some difficulties in the future that could threaten that margin, including rising commodity prices and labor shortages. Tesla's biggest cost exposure is for nickel, which goes into battery cells, and aluminum, which the company uses for other nonbattery components, he said. Tesla also will face inefficiencies as it starts production at new factories in Texas and Germany next year, he said.
The company already is seeing commodity cost increases, which have resulted in price hikes, Kirkhorn said. Next year it's possible that Tesla will see more. "It's difficult to say precisely, but the volatility and the increases are just so substantial," he said.
Tesla executives also made their first public comment on multiple investigations of the company by U.S. safety regulators. Moravy said Tesla is cooperating as much as possible.
The National Highway Traffic Safety Administration has opened an investigation into why Tesla's Autopilot driver-assist system keeps running into parked emergency vehicles. Of the dozen crashes that are part of the probe, 17 people were injured and one was killed.
The safety agency also is questioning why Tesla didn't recall vehicles with Autopilot when it did an over-the internet software update so they better recognize firetrucks and police cars in low light. NHTSA said the update addressed a safety defect.
Kirkhorn said safety is important to Tesla as the auto industry transitions from traditional cars to being more software-oriented. “Regulatory bodies, and understandably so, are interested in understanding how to regulate in this environment, and NHTSA is no exception,” he said. “Were excited to partner and we'll work collaboratively with all the different regulatory bodies.”
Tesla hasn’t always cooperated with the safety agency, though. In January, Tesla resisted a request from NHTSA to recall about 135,000 vehicles because their touch screens could go dark. The agency said the screens were a safety defect because backup cameras and windshield defroster controls could be disabled.
A month later, after NHTSA started the process toward holding a public hearing and taking Tesla to court, the company agreed to the recall.
In its shareholder statement, Tesla also said that construction of its new factory near Austin is progressing as planned and it’s preparing equipment and “fabricating our first pre-production vehicles.”
The factory, which is centrally located versus Tesla’s other assembly plant in Fremont, California, will send Model Y small SUVs and new Cybertruck pickups to East Coast population centers.
Tesla said it expects to expand its factory capacity quickly, and over a “multi-year horizon” it expects sales to grow an average of 50% annually.
Shares of Tesla Inc. fell 1.6% to $851.80 in after-hours trading Wednesday.


SISCO’s subsidiary LogiPoint acquires Elite Group

SISCO’s subsidiary LogiPoint acquires Elite Group
sisco.com
Updated 12 sec ago

SISCO’s subsidiary LogiPoint acquires Elite Group

SISCO’s subsidiary LogiPoint acquires Elite Group
  • The transaction is to be funded through bank financing and direct cash investment

Saudi Trade and Export Development Co. (LogiPoint) has acquired Elite Group through Green Dome Investments LLC, according to a bourse filing by its parent Saudi Industrial Services Co. 

The transaction was concluded on Nov. 25, with LogiPoint’s investment in Green Dome valued at SR58 million ($15 million).

SISCO expects the impact of the transaction to be shown in the consolidated financial statements of the fourth quarter of 2021, through LogiPoint.

The transaction is to be funded through bank financing and direct cash investment. 

Elite Group is an integrated land freight and courier solutions provider in the region. 


Bahrain outlook improves on fiscal reforms, S&P says

Bahrain outlook improves on fiscal reforms, S&P says
Image: Shutterstock
Updated 39 min 17 sec ago

Bahrain outlook improves on fiscal reforms, S&P says

Bahrain outlook improves on fiscal reforms, S&P says
  • The agency said it expects the government to benefit from additional financial support from its Gulf neighbours

S&P Global Ratings has revised Bahrain's outlook to 'stable' from 'negative' on the back of new fiscal reforms aimed at improving non-oil revenues and cutting state spending, the ratings agency said in a statement.

Rated below investment grade, Bahrain was bailed out to avoid a credit crunch in 2018 with a $10 billion package from wealthy neighbours, Saudi Arabia, Kuwait and the United Arab Emirates.


That money was linked to a set of fiscal reforms, but after the coronavirus crisis strained its finances, Bahrain in September postponed plans to balance its budget by two years and announced plans to increase a value-added tax.


"The Bahraini government recently announced additional fiscal reforms to strengthen non-oil revenue and rationalize expenditure. These measures, along with the more supportive oil price environment, should improve the sovereign's fiscal position", S&P said in a statement this weekend.


The agency said it expects the government to benefit from additional financial support from its Gulf neighbors, if needed.


Bahrain will double value-added tax to 10 percent next year, a move which S&P estimated could contribute receipts of about 3 percent of gross domestic product in the next few years, up from about 1.7 percent this year.


The Gulf state is also planning to rationalize operational government expenditure and social subsidies in 2023 and 2024, a move which shifts the focus of its reforms more on the spending side than on raising non-oil revenues.


"We believe there is higher implementation risk in expenditure rationalization as the delicate political and social environment on the island, which has constrained the government's efforts, persists", S&P said.


Bahrain has in the past backtracked on some reforms as its Sunni Muslim rulers feared that austerity moves would bolster the majority Shi’ite-led opposition and stir more of the unrest that rattled the country since the 2011 Arab Spring uprisings.


How Omicron is affecting Middle East markets

How Omicron is affecting Middle East markets
Image: Shutterstock
Updated 53 min 16 sec ago

How Omicron is affecting Middle East markets

How Omicron is affecting Middle East markets
  • Oil prices stumbled in their biggest decline since April 2020

DUBAI: The new COVID-19 variant, Omicron, has prompted global economic concerns, as fears of its spread begin to affect stock markets and oil prices. 

Saudi Arabia’s main market, the Tadawul All Share Index, opened 5.3 percent lower on Sunday, trading near 10,700 points. 

The Dubai Financial Market was down 8.49 percent.

Oil prices stumbled in their biggest decline since April 2020, with Brent prices dropping 11.55 percent to $72.72 per barrel when markets closed on Friday, while WTI slid 13.06 percent down to $68.15 per barrel.

The variant was first discovered in South Africa and had also since been detected in Belgium, Botswana, Israel, the UK, Australia and Hong Kong.

Within the Middle East Israel is the only country to have reported a case of the new variant so far, but some governments in the region have issued travel curbs to prevent the virus from spreading. 

On Sunday, Saudi Arabia expanded the list of African countries where it barred travel because of Omicron, adding Malawi, Zambia, Madagascar, Angola, Seychelles, Mauritius and the Comoros Islands.

The Kingdom earlier halted flights to and from South Africa, Namibia, Botswana, Zimbabwe, Mozambique, Lesotho and Eswatini.

Other Middle East countries, including the UAE, Bahrain, Morocco, and Jordan have issued similar measures. 


Saudi stock market drops 5.3 as Omicron sparks global concern

Saudi stock market drops 5.3 as Omicron sparks global concern
Updated 53 min 1 sec ago

Saudi stock market drops 5.3 as Omicron sparks global concern

Saudi stock market drops 5.3 as Omicron sparks global concern

Saudi Arabia’s main market, the Tadawul All Share Index, opened 5.3 percent lower on Sunday, trading near 10,700 points.


Aramco prepares work on its largest non-associated gas field

Aramco prepares work on its largest non-associated gas field
Updated 28 November 2021

Aramco prepares work on its largest non-associated gas field

Aramco prepares work on its largest non-associated gas field
  • The Saudi-listed firm claims it to be the “largest non-associated gas field” in the Kingdom

DUBAI: Saudi Arabia’s oil giant Aramco is marking the start of its development of the Jafurah unconventional gas field on Nov. 29. 

The Saudi-listed firm claims it to be the “largest non-associated gas field” in the Kingdom. 

The move is part of the Kingdom’s push to commercialize its unconventional resources and expand Aramco’s integrated gas portfolio.