Tesla May Have a Pleasant Surprise by the End of the Year

Times are tough, even for the biggest electric car maker, but good news could be on the way.

On April 21, Tesla  (TSLA) – Get Tesla Inc Report posted stronger-than-expected first-quarter profits, record sales and a bullish near-term outlook that defied Wall Street’s forecasts.

‘Rabbit Out of the Hat’

This all comes at a time when many companies, including Tesla, are being hit by inflation, raw material prices, and logistics costs.

Nevertheless, CEO Elon Musk told analysts during the company’s earnings call that he felt good about the future.

“We remain confident of a 50% growth in vehicle production in 2022 versus ’21,” Musk said, according to a transcript of the call. “I think we actually have a reasonable shot at a 60% increase over last year. Let’s see.”

The world’s richest man also said that vehicle production in the second quarter will most likely be similar to the first quarter, or perhaps slightly lower.

“But it’s also possible we may pull a rabbit out of the hat and be slightly higher,” Musk said. “But then, Q3 and Q4 will be substantially higher. So it seems likely that we’ll be able to produce over one and a half million cars this year, that’s my best guess.”

Chief financial officer Zach Kirkhorn noted that higher pricing “continues to positively impact our financials, as we make progress delivering cars in our growing backlog.”

Kirkhorn, who described the quarter as “challenging but extremely successful,” told analysts that delivery wait times for most Tesla vehicles are quite long.

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“Those cars delivered in Q1 generally carried pricing set in prior quarters, and at levels lower than cars being ordered today,” he said. “Our per unit vehicle costs increased as well. Inflation, raw material prices, expedites and logistics costs continues to impact our cost structure.”

Musk chimed in, explaining that “prices of vehicles ordered now are really anticipating supplier and logistics cost growth that we’re aware of, and believe will happen over the next six to 12 months.”

‘Coming Back With a Vengeance’

“So that’s why we have the price increases today, because a car ordered today will arrive, in some cases, a year from now,” he said. “So we have a very long wait list.”

Tesla, Kirkhorn said, is”trying to anticipate where things will go and make sure that the pricing that we have put in place at the time that those raw material cost increases hit us that they align, and that the company can remain financially healthy in various scenarios as we look out over the next four quarters.”

“We hope we don’t need to increase the pricing further,” Musk said. “The current pricing is anticipating what we think is the probable growth in costs. And if that growth in cost does not materialize, we actually may slightly reduce prices.”

The company’s Shanghai factory has been hit with lockdowns and Kirkhorn said Tesla lost about a month of build volume out due to Covid-related shutdowns.

“Production is resuming at limited levels, and we’re working to get back to full production as quickly as possible,” he said. “This will impact total build and delivery volume in Q2.”

Musk said the Shanghai facility is “coming back with a vengeance.”

“So I think not withstanding new issues that arise, I think we will see a record output per week from Giga Shanghai this quarter, albeit we are missing a couple weeks,” he said.

Musk has been on a quite a roll lately. On April 7 he inaugurated his new factory in Austin, Texas and on April 24 Twitter  (TWTR) – Get Twitter, Inc. Report agreed to Musk’s $44 billion takeover offer that will see the microblogging site become a private company.