Tesla is due to publish its first quarter results after the close of trading Monday, and there will be plenty for investors to look out for.
Consensus points to earnings per share of roughly $0.77 on revenue of $10.3 billion. That’s based on earlier data showing sales volumes jumped to nearly 185,000 vehicles versus market expectations of 174,000.
Traditional points of interest include any new hint about the planned start of production in its two new assembly plants in Germany and Texas; the timing of first deliveries for the refreshed Model S flagship sedan; as well as any possible impact from the ongoing chip shortage that has shut down assembly lines at rivals such as Daimler’s Mercedes-Benz.
Here are five other key issues to note when chief executive and “Technoking” Elon Musk hosts the quarterly investor call:
Clarity on the deadly crash in Texas
The mysterious deaths of two men who perished after their Tesla Model S crashed into a tree have captivated the Tesla community. Initial evidence from the scene suggests no one was in the driver’s seat, according to law enforcement officials, prompting suspicion that the brand’s vaunted self-driving system might have been behind the accident, a claim Musk denied via Twitter.
Tesla fans argue the system could not have been activated without the computer registering the presence of someone behind the wheel, nor would it have been possible in a cul-de-sac that lacked lane markings. Authorities have reached out to attain access to Tesla’s logs in hopes of clearing this up, but for the moment only theories abound.
Full Self-Driving (FSD)
One reason why the Texas crash is so relevant is that Tesla’s autonomous driving software is the single greatest factor underpinning its lofty tech-company–style valuations. The ninth iteration of the company’s Full Self-Driving (FSD) could be a major step toward this goal as it is expected to eventually come with the “button,” by which everyone who opted for FSD can join the ongoing beta test of the as yet unfinished software.
Musk claims repeatedly his team is on the cusp of solving full autonomy, but the current FSD system is not designed for drivers to take their eyes off the road, as a crash could potentially happen at any time. Without the revolutionary driverless technology reaching full autonomy, Tesla loses a key pillar of its equity story and becomes just another carmaker with advanced driver assistance systems—one likely unworthy of a current market cap that, at $700 billion, dwarfs that of all other established brands.
Crypto
Fans of digital tokens were disappointed after their collective attempt to drive the price of Dogecoin last week to fresh highs lacked the moral support of Musk, who morphed into a mascot of the digital asset with his tongue-in-cheek tweets and memes. The progressive reputation of the freshly named “Technoking of Tesla” (Musk’s new title according to an SEC filing) helped fuel the latest craze in cryptocurrencies after the company revealed in January that it had invested $1.50 billion in Bitcoin. “We expect to begin accepting Bitcoin as a form of payment for our products in the near future,” it wrote in its Q4 earnings report, justifying the move.
Investors will be looking to see if this position has changed either way after the company warned it may need to book impairment charges should the price of Bitcoin drop below the carrying value on its books. While having no impact at cash level, the crypto element introduces unnecessary volatility into Tesla’s profit and loss statement. Other carmakers like BMW say existing payment systems fully suffice, eschewing the need for cryptocurrencies.
Regulatory credits
One of the areas of Tesla’s business not widely understood by the broader public is the current source of its profits. Jurisdictions such as Europe, California, and China have imposed draconian penalties on automakers that fail to clean up their fleet. To create a market incentive that rewards leaders and punishes laggards, companies like Tesla receive compensation for selling their CO2 credits to brands to help make them compliant.
Tesla booked steady revenue worth roughly $400 million each quarter last year. While this translates to less than 6% of its automotive-related sales, it comes at no added cost, so it flows almost directly to the bottom line. Without these profits, Tesla would have remained in the red last year. As more and more carmakers launch their own battery electric vehicles, this source of income will eventually dry up.
The question is: How soon?
Image crisis in world’s largest market
China has cracked down recently on companies perceived to present a risk to its unfettered control over the country, most recently targeting Jack Ma’s empire built around e-commerce giant Alibaba and its Ant financial group.
Tesla too has been targeted, with security concerns that its cameras may record imagery and send them back to the U.S. It also got caught up in a PR stumble at the Shanghai auto show involving a viral video of a Tesla protester. Chinese state-controlled media branded the company’s response to the protester as clumsy, tone-deaf, and possibly “the biggest public relations crisis” for Tesla in this crucial market.
Any indication that Chinese consumers’ love affair with Tesla is diminishing represents a key risk to the group, especially as homegrown upstarts like Nio, Xpeng, and Arcfox look to steal customers.
German automakers have been repeatedly mocked for their obsequious attempts to remain in the good graces of Beijing despite China’s questionable human rights record.
Musk may now be learning what it means to do business in China.
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