On January 27th, the US electric car manufacturer Tesla announced its fourth-quarter and full-year financial results for fiscal 2021. According to the financial report, Tesla’s fourth-quarter revenue was $17.719 billion, an increase of 65% from $10.744 billion in the same period last year; net profit was $2.321 billion, an increase of 760% from $270 million in the same period last year.
Adjusted earnings per share came in at $2.54, beating analysts average estimate of $2.26 per share. Following the earnings report, Tesla CEO Elon Musk, CFO Zach Kirkhorn and investor relations chief Martin Viecha, among others Guan attended the earnings conference call, introduced the company’s fourth-quarter results and answered questions from investors and analysts.
Musk said 2021 will be a breakthrough year for Tesla, with a 90% increase in the company’s sales and a new record for Tesla’s operating profit margin. The company’s cumulative profitability has been increasing since the fourth quarter of 2021.
Although Tesla does not plan to announce the construction of a new Gigafactory this year, Musk said that Tesla will continue to look for a new site to build a Gigafactory by the end of the year. He mentioned that Tesla’s Texas Gigafactory will use 4680 cells and new structural components and begin delivering finished cars after certification. He mentioned that the first cars with 4680 battery packs are expected to be delivered to users as early as this quarter.
Musk pointed out that Tesla’s current business focus is on the Texas Gigafactory and the Berlin Gigafactory. We’ve already produced a small number of cars in Austin and Berlin, he said, stressing Tesla’s focus this year on continuing to expand vehicle production. We won’t be launching new models this year, he said. If we launch new cars, total car production will be down. But Musk mentioned models such as the Cybertruck, Tesla Roadster, and the Optimus robot. Engineering design is being continuously optimized.
Musk believes that the Optimus humanoid robot will be Tesla’s most important product. I think over time that’s going to be the most important (product), he said, adding that if the labor shortage no longer exists, I’m not even sure what the economy will mean.
Kirkhorn then emphasized in his speech that the contribution of sales of carbon emission credits to Tesla’s business in the fourth quarter has decreased and will continue to decrease. He also said that global supply chain constraints and chip shortages are the main factors constraining Tesla from further expanding investment.
During the investor Q&A session, someone asked when Tesla would launch its $25,000 electric car. We’re not currently developing a $25,000 car, Musk said. We’ve got enough to do now. Quite frankly, too much. What really matters is when the car will drive itself, which will reduce transportation costs by four to five times.
There is also the question of whether Tesla will introduce a home heating, ventilation and air conditioning (HVAC) system, an idea Musk and Tesla executives are interested in, without denying that the company will not launch a similar product. Musk sees the next logical step as plumbing, saying, I think it’s going to be a pretty big game-changer, but we have a lot of other opportunities ahead of us.
Investors also mentioned whether Tesla will launch a long-term or permanent license for the Full Self-Driving (FSD) system. Musk noted that such a system would seem complicated. Tesla currently prefers to focus on providing affordable FSD systems to Tesla car owners.
When asked about Tesla’s supercomputer Dojo, Musk revealed that the supercomputer will start doing something useful this summer. This supercomputer became practical when the FSD development team preferred to use Dojo rather than the current system. Fully autonomous driving doesn’t require Dojo, which would be a cost optimization for training large amounts of data, Musk explained. If Dojo is competitive, we may offer this service to other companies.
Someone mentioned the Tesla insurance business, which is currently online in five US states. Both Musk and Kirkhorn believe that insurance based on driving information is more useful because people can drive safer as long as they know how to drive. They mentioned that Tesla insurance purchase rates are also quite impressive, Kirkhorn said, Our internal goal is that by the end of this year, 80% of Tesla customers will choose Tesla insurance services.
As for where Tesla’s Optimus robot will be used first, Musk said, If we can’t find a use for it, we can’t expect others to find a use for it. The first application of Optimus will be at Tesla, Like moving parts in a factory.
An investor asked about the maximum output of Tesla’s various factories. Musk said that this question is difficult to answer because it is easy to expand the maximum production capacity of the factory. Increasing capacity is possible,” Musk said, adding that Tesla would increase factory capacity across the board.
Some people also asked what factors affected the launch of the Cybertruck. Musk said the battery may not be the limiting factor for the Cybertruck. But there are many new technologies that will take some time to implement. The Cybertruck must also be priced reasonably, with Tesla currently aiming to build 250,000 Cybertrucks a year.
As for how Tesla can continue to improve profit margins, Kirkhorn pointed to the Model Y as the key because it is much more profitable than the Model 3. The localization of auto parts at the Shanghai Gigafactory has also helped a lot in improving profit margins. In addition, higher prices for Tesla vehicles in some markets have also helped boost profit margins. Kirkhorn also believes that Tesla’s software business should be the main focus for improving profit margins, because of its very high margins. When FSD and self-driving taxis finally become a reality, Tesla’s profit margins will increase significantly.
Investors also mentioned how Tesla can achieve Level 4 autonomous driving and whether it needs the help of the Dojo supercomputer. Musk said the Dojo supercomputer is not necessary to achieve fully autonomous driving. He also explained that ultimately reaching the level of a human driver is not a very high bar. “There will be some significant improvements to the FSD system over the next few months,” Musk said.
Jed Dorsheimer, an analyst at investment bank Ganac, asked about Tesla’s energy business and energy products. Musk said Tesla will use iron-based batteries in its energy storage products. All stationary storage will move to iron-based or non-nickel-based energy storage systems, he said, adding that manganese is also an unknown factor for energy batteries.
Musk acknowledged that Tesla’s energy business was neglected last year by focusing on supporting the company’s auto business. But the limitation is a chip supply issue, not a battery. In the long run, Tesla’s energy business is still aiming for hundreds of millions of kilowatt-hours a year.
When asked if 2022 will be the year Tesla’s energy business recovers, Musk believes that the chip shortage may ease this year, but the energy business will indeed grow this year. “If we actually meet the market demand, (Tesla’s energy business) will grow two to three times,” Musk said.
Baird analyst Ben Kallo asked how Tesla’s R&D organization works. Tesla executives pointed out that the company doesn’t have an incubator, but the team is simply working to turn ideas directly into products. Musk and other executives later also emphasized the value of working on real projects and focusing on doing things.
Pierre Ferragu, an analyst at market research firm New Street Research, asked about the progress of Tesla’s 4680 battery, specifically how the 4680’s form factor fits into Tesla vehicles. And the question of whether 4680 batteries will be used outside of Tesla cars.
Kirkhorn confirmed that Tesla is already working with some suppliers on the 4680 battery form factor. He said: Our cooperation is to bring a better form factor to the 4680 battery. In other words, the 4680 battery has not been finalized, such as iron-based batteries, which have not been optimized in the 4680 battery design.
Bernstein analyst Toni Sacconaghi asked about the adoption rate of Tesla’s Full Self-Driving (FSD) system. With true FSD technology, Musk said, you won’t even want to look in the rearview mirror because this technology will bring profound changes. When this happens, the value and volume of this system will be enormous.
Talking about Tesla’s product roadmap, Sacconaghi asked if Tesla can achieve its goal of selling 3 million electric vehicles a year in 2024 by selling a lot of cash cars and Cybertrucks. Musk veered back to the topic of FSD and the value it provided. “If our car costs don’t change, we can sell as much as we build,” he added.