Tesla (TSLA) Receiving A Strong Jolt After Reporting Impressive Q4 Delivery Numbers
2:51 pm Monday, January 03rd, 2022
Tesla’s (NASDAQ:TSLA) resiliency is on display again this morning after the company reported electrifying Q4 delivery results that not only smashed analysts’ expectations but also set a new company record. Undeterred by ongoing supply chain obstacles, total deliveries surged by 71% yr/yr to 308,000 vehicles, with Model 3 and Model Y leading the way. On a combined basis, TSLA delivered nearly 297,000 of those two vehicles, up 83% from a year earlier.
From a broader perspective, it’s clear that consumer demand for electric vehicles (EVs) continued to strengthen as 2021 came to a close, providing TSLA and its counterparts with a powerful tailwind. This upswing was also illustrated by impressive December delivery reports from China-based EV makers NIO (NIO) and XPeng (XPEV), which registered yr/yr growth of 50% and 181%, respectively. Along with sizable governmental tax credits, major advances in battery technology and more affordable price points have elevated EVs to the mainstream.
For TSLA, the Q4 delivery report puts a bullish bookend on a year that became a bit bumpy. After CEO Elon Musk followed through on the results from his own Twitter (TWTR) poll by selling 10% of his TSLA holdings, vehicle recall issues emerged again late last week. Earlier in 2021, safety concerns over TSLA’s autopilot system prompted the National Highway Traffic Safety Administration (NHTSA) to conduct an investigation into the self-driving technology, leading to a high-profile recall. This time, the issue stems from faulty hoods and backup cameras, causing TSLA to recall about 500,000 vehicles.
However, negative headlines for TSLA never seem to have much staying power. Today’s stunning Q4 delivery report shines the spotlight back on the company’s remarkable execution and its momentum heading into 2022. While TSLA has not been completely immune to the chip shortage challenges that have plagued the auto industry, it has circumvented the complications better than most. A key to the company’s success has been its ability to develop new firmware to assimilate with chips made by new suppliers.
This type of flexibility and innovation will be paramount in 2022 as TSLA fires up new plants in Austin, TX and in Berlin, Germany. The addition of those facilities should help push annual production towards the 1.5 mln unit mark this year, but Musk has warned that supply chain shortages could persist until 2023. Although he still expects the company to achieve 50% average annual growth in vehicle deliveries over a multi-year horizon, the complexity of launching new plants and new vehicle models in this environment is substantial.
On a related note, CFO Zack Kirkhorn warned during the Q3 earnings conference call in October that automotive gross margin will likely slide lower once the new factories are operational. After expanding by over 280 bps last quarter to 30.5%, this metric exemplifies TSLA’s progress in manufacturing efficiency. Since some margin erosion is anticipated and understood, we believe the primary narrative for TSLA in 2022 will be production and delivery growth. That should be good news for TSLA investors because the company has routinely outperformed expectations on those measures.
