Tesla tries to relieve demand concerns

Tesla (NASDAQ:TSLA) Inc said on Wednesday it expects to miss its vehicle delivery target this year, but downplayed concerns about softening demand after its revenue missed Wall Street estimates.

Chief Executive Elon Musk told analysts on a conference call that there was excellent demand in the fourth quarter, allaying investor concerns that buyers could be discouraged by the weak global economy and the high prices of Tesla vehicles. But Tesla said some logistical challenges would remain, with fourth-quarter deliveries up less than 50% while production rose 50%. "I wouldn't say we're recession-proof, but certainly recession-proof," Musk said. Previously, Tesla has repeatedly said it is targeting 50% growth this year from the 936,172 cars it delivered in 2021. The company's shares fell about 6% in after-market trading. Tesla has been growing rapidly despite global economic tremors, and investors are closely watching for signs that consumer demand is cooling as inflation rises and interest rates rise. "This quarter was not all rainbows and roses, leaving investors wanting more from Tesla, which has been held to a higher standard than any other automaker," Wedbush analyst Daniel Ives wrote in a client note. "Tesla now has to prove to the street again that its solid growth story faces myriad logistical issues as demand softens with electric vehicle competition from around the world." The electric carmaker's third-quarter automotive gross margin of 27.9% was below analysts' estimates and fell to 30.5% year-on-year. According to IBES data from Refinitiv, third-quarter revenue hit a record $21.45 billion but fell short of analysts' estimates of $21.96 billion. The company said there was a $250 million unfavorable foreign exchange impact on its earnings due to the strengthening of the US dollar against other major currencies. According to Tesla's statement, "raw material cost inflation, along with ramp inefficiencies, impacted our profitability" from its new factories in Berlin and Texas and the production of its new 4680 batteries. Musk added that production of the 4680 battery is ramping up rapidly, but executive Andrew Baglino said, "There are challenges ahead that we have yet to overcome. There is no doubt about that." Musk added that Tesla's Semi trucks, which will start being delivered to customers starting this December, will not use 4680 battery cells. Musk also said the company has the ability to conduct a share buyback in the range of $5 billion to $10 billion, pending board review and approval. Follow Global Economic Developments on Social Media! Click here to follow Ieconomy official Facebook account! Click here to follow Ieconomy official Instagram account! Click here to follow Ieconomy official Twitter account!