Tesla beats earnings, but investors should be worried about their falling margins
Tesla reported mixed earnings yesterday, which showed what analysts expected — the second quarter was going to be challenging for the top electric vehicle maker.
was little changed after reporting earnings.
What’s the big deal? Many of Tesla’s problems were known beforehand: Tesla’s deliveries were impacted by the shutdown of its Shanghai production facility over COVID lockdowns and existing supply chain issues.
Those problems led to auto deliveries falling 18% from the previous quarter. Tesla reported:
- $16.9B in sales — up 41% compared to the previous year but lower than the $17.1B forecast.
- $2.27 earnings per share — compared to analyst forecasts of $1.81.
- 27.9% gross margin — compared to 32.9% in the previous quarter.
Last month, Tesla began laying off 10% of its employees, with Musk having “a super bad feeling about the economy.” And he has good reasons to be worried.
Avoiding auto: Odds of a recession continues to rise, and the arrival of one will have a major impact on the auto industry. A recession lowers demand, and rising rates will make car loans more expensive — pricing out some buyers.
Auto is one of the last sectors you want to be in when a recession hits. Just ask Chrysler and G.M., who filed for bankruptcy after the 2008 financial crisis.
