Tesla’s Efforts to reduce Costs contributed to its improved Business Performance

Tesla (NASDAQ: TSLA) announced 2021 Q4 financial results on January 26th, 2022. According to the announcement, total revenues, operating income and net income were up 65%, 354% and 760%, respectively (GAAP, 3 months, YoY). Automotive sales recorded 15,967 million USD (3 months), accounted for 87% of total revenues. It was up 71% on year-over-year basis. EPS attributable to common stockholders was up 754% (GAAP, 3 months, YoY).

Due to the higher inflation rate under the COVID-19 pandemic, manufacturing costs are now rising. However, even under such circumstances, Tesla continues to reduce costs through technological innovation. The company’s operating margin and gross margin remained at the comparable level on quarter-over-quarter basis. The operating margin for 2021 Q4 recorded 14.7%, up 940bp (3 months, YoY). Free cash flow (FCF) was also up 49% (3 months, YoY) to record 16%.

As of the end of 2021, Texas and Berlin’s Gigafactory are under equipment test before production. The expansion of production scale and the promotion of local delivery brought by new factories can both contribute to reducing the production cost of Tesla’s EV. In addition, Tesla has expressed its intention to work to reduce costs through technological innovation.

Under the current higher inflation rate which caused rising costs, we believe that Tesla’s ongoing efforts to reduce costs have contributed significantly to the company’s improved business performance.

Tesla, Inc. (NASDAQ: TSLA) Stock Chart

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  1. Watanabe & Brothers’ Investment is holding shares of Tesla.
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