Author: Winthrop
The Q4 financial report released by Tesla today can be summarized as: “The bad is not as bad as imagined, and the good is better than expected“.
The overall pre-tax net profit margin (including the automotive, solar, and after-sales service departments) of Tesla is 16.0% (compared to 17.2% in the previous quarter). The automotive department alone accounts for 87.6% of Tesla’s total revenue (compared to 87.1% in the previous quarter).
The gross profit margin (excluding carbon credits) of the automotive department is 24.2% (compared to 26.8% in the previous quarter).
The overall gross profit of the company is 5.77 billion USD (compared to 5.38 billion USD in the previous quarter), and the operating net profit is 3.90 billion USD (compared to 3.68 billion USD in the previous quarter).
The free cash flow is 1.42 billion USD (compared to 3.29 billion USD in the previous quarter).
There was a huge amount of cash investment in this quarter (Purchase of investments), with an amount of about 4.3 billion USD, far exceeding the average amount of the previous several quarters, which was around 1 billion USD. The flow of this cash has not yet been seen, so we need to wait for the official financial report to find out.
During the expansion and high-growth periods of the company, the free cash flow is best maintained at a certain level, neither too much nor too little. Too much may indicate that the management found no place to invest the funds, indicating that the company’s expansion expectations are average; too little may indicate that the management’s investment plan is too aggressive, and the company will face certain liquidity problems in the future.
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Here is an update on the long-term trend line of specific operating data.
Revenue, Selling Price and Gross Profit
As of the end of December 2022, the production capacity of all Tesla’s global Gigafactories has exceeded 2 million vehicles, and quarterly revenues continue to reach new highs.
# ASP Continues to Drop in 2023, Expected to Reach 47k
Due to the impact of year-end rush orders and price reductions, ASP (average selling price) continues to decrease. Management expects the ASP for the full year 2023 to further drop to 47k. According to the model calculation, this is roughly the level after the recent price reduction, which may mean that there will be no further price reductions in the coming year.
Affected by the price reduction, gross profit continues to decline, leading to Davis’s double kill. However, in terms of gross margin, the speed of gross margin decline is partially offset due to the synchronous reduction in selling price.
Operating Expenses
Tesla’s biggest bright spot last quarter was expense control, which continues to improve this quarter. The ratio of expenses to revenue decreased from 9.1% last month to 8.8% this month.
Profit
Despite the sluggish demand in the year-end environment, which led to a decrease in ASP and gross profit, the improved expense control has continued to drive Tesla’s profit momentum from the previous quarter. If raw material inflation can be controlled this year, both gross profit and net profit are likely to regain a steep rise without increasing the ASP.
Production Asset Efficiency
The average depreciation and amortization per car continue to decrease, and the super factories in Texas and Berlin are two big drags, and it is expected that this will continue to hit a new all-time low after these two factories break through the bottleneck.
Research and Development Efficiency
Tesla’s total investment in research and development may not be the highest, but its investment per vehicle is the highest in the industry. The core lies in the fact that there are fewer vehicle types, resulting in a high per-vehicle investment intensity. Combined with the scale of vehicle sales in the market, the diluted cost of research and development is very low. It is fully capable of achieving high-quality research and development results at low cost.
Overall, this financial report is in line with previous expectations, and it also sets a reference point for Tesla’s next quarter financial report, which was shaken by various rumors.
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.