Tesla reveals Q4 results with record revenue, net income, shrinking automotive gross margins

Top U.S. electric automaker Tesla Inc. on Wednesday reported its financial results for the fourth quarter of 2022 with record revenue, net income and shrinking automotive gross margins.

Total revenue in the quarter grew 37 percent year over year to 24.3 billion U.S. dollars, with an increase of 13 percent quarter over quarter.

In 2022, Tesla's total revenue reached 81.5 billion dollars, a 51 percent jump year over year.

The company's quarterly net income improved to 3.7 billion dollars. Yearly net income was 12.6 billion dollars, more than double a year ago.

Tesla reported vehicle deliveries of 405,278 in the fourth quarter and 1.31 million vehicle deliveries in 2022, both record deliveries for the company. However, the numbers still missed Wall Street estimates and Tesla's own guidance of 50 percent growth year over year to deliver 1.4 million vehicles in 2022.

Tesla had 1.4 billion U.S. dollars in free cash flow at the end of the fourth quarter, down from 3.3 billion dollars by the end of the third quarter.

After Tesla reduced prices and offered discounts on its vehicles, the company closed the quarter with a 16 percent operating margin as a whole, with automotive gross margins coming in at 25.9 percent, down nearly 5 percentage points from a year ago. Investors expect the figure to continue falling this year.

According to Eric Schiffer, a Tesla investor and the CEO of private equity firm Patriarch Organization, margins in the first quarter of 2023 might look worse.

"The outlook will still depend on the recent moves of Q1, which suggest some compression in demand," he was quoted as saying in a report by TechCrunch.

"Tesla is not immune from the recession, and I still expect to see more recession-driven market pain," Schiffer noted.

Facing macroeconomic pressures, a looming recession and increasing competition from other automakers, Tesla said that average sales prices have "generally been on a downward trajectory for many years," and the company would prioritize "affordability" to sell multiple millions of cars annually.

The company expects to build about 1.8 million cars in 2023. "As we progress in 2023, we know there are questions about the near-term impact of an uncertain macroeconomic environment, and particularly, with rising interest rates," Tesla said, adding that it will accelerate the cost reduction roadmap and drive towards higher production rates.