Tesla profits surge as EV maker races past rising material costs

Tesla Inc surged past Wall Street estimates for quarterly revenue and profit on Wednesday, as the electric vehicle (EV) maker raised prices in response to inflation, offsetting the impact of a Shanghai factory shutdown.

Tesla has been an outlier since the outbreak of the coronavirus pandemic, posting record deliveries and earnings for several quarters when rivals wrestling with global supply-chain snarls rolled out production halts.

Shares of Tesla rose 4 percent after the close of regular trading.

“Price increases are nicely exceeding cost inflation,” said Craig Irwin at Roth Capital.

“Chinese production issues seem well managed, and we expect Austin and Berlin to make up the slack from Shanghai’s 19-day outage.”

Tesla raised its prices in China, the United States and other countries, after CEO Elon Musk said in March that the US EV maker was facing significant inflationary pressure in raw materials and logistics amid the crisis in Ukraine.

“Our own factories have been running below capacity for several quarters as supply chain became the main limiting factor, which is likely to continue through the rest of 2022,” Tesla said in a statement.

Tesla said chip shortages and recent COVID-19 outbreaks have been weighing on its supply chain and factory operations, while prices of some raw materials have increased multifold times in recent months.

The world’s most valuable automaker said revenue was $18.8bn in the first quarter ended March 31, versus estimates of $17.8bn, according to IBES data from Refinitiv. This is up 81 percent from a year earlier.

Sales of its regulatory credit to other automakers jumped 31 percent to $679m in the first quarter from a year earlier, helping boost revenue and profits.

Its earnings per share was $3.22, beatings analysts’ estimates of $2.26.

Tesla shut down its Chinese factory for about three weeks before resuming production gradually this week. “Although limited production has recently restarted, we continue to monitor the situation closely,” the company said on Wednesday.

Musk offered to buy Twitter last week, sparking concerns about him being distracted from Tesla at a time when it is ramping up production at new factories in Berlin and Texas. The new factories will be key to meeting demand and reducing reliance on its China factory, its biggest one, which is slowly recovering from a plant shutdown.

There are concerns that Musk may sell some Tesla stocks or borrow against additional Tesla shares to finance his $43bn bid to buy Twitter.