Tesla’s quarterly report will soon focus on Shanghai factory output and supply chain cost overview

Investors will pay close attention to Tesla’s TSLA.O quarterly results announced on Wednesday to understand its performance in China. In the face of negative news and the rise of many new Chinese competitors, the electric car manufacturer’s sales in the Chinese market are still strong.

Profile picture: January 2020, Shanghai, China, Tesla factory vehicle delivery site. REUTERS/Aly Song

Tesla, led by billionaire entrepreneur Elon Musk, is expected to report strong revenue, driven by record global deliveries from July to September.

Although Tesla is better than its competitors in responding to the chip shortage crisis, some investors still worry that supply chain issues may lead to higher costs and lower profit margins.

The good news may come from Tesla’s Shanghai plant, which has already surpassed Tesla’s plant in Fremont, California, and has reduced costs by using more Chinese components, including batteries.

A person familiar with the matter said that Tesla began to deliver a cheap version of Model Y sports car (sports SUV, SUV) at the end of August, which is equipped with a cheaper iron-based battery provided by China Ningde Times 300750.SZ .

“The efficiency of China’s super factories is the most important, so that profit margins will rise.” Wedbush analyst Dan Ives, who is optimistic about Tesla, said.

Tesla founder and CEO Elon Musk said that the output of the Shanghai plant has now surpassed the company’s only California plant in the United States.

“The Shanghai factory has the best quality, the lowest cost, and low problems, so it’s great.” He said at the shareholder meeting earlier this month.

Even so, Tesla has not survived the global supply chain crisis, and part of the reason Tesla’s better performance is that it is willing to spend more.

“We have spent huge sums of money on air transportation of parts around the world, which is not good at all, but it is hoped that it will only be temporary,” Musk said.

Some investors want to know how much the cost has increased.

“I think there may be an adverse impact on profit margins. They are paying more for parts,” said Gene Munster, one of Tesla’s investors and managing partner of venture capital firm Loup Ventures.

“I think if they can increase the gross profit margin of cars in this environment, it will be a huge benefit.

Tesla’s China revenue in the third quarter surged 44% compared to the previous quarter, and its exports to Europe and other countries also increased, and it also launched a more economical model, the Model Y SUV.

“It seems that the negative news has not really hurt the demand for loyalty. Consumers have very high confidence in Tesla’s products,” said Zhang Yu, managing director of Automotive Foresight, a Shanghai consulting firm.

“Other local competitors did catch up very quickly, but Tesla still leads,” he said.

Investors will also pay close attention to Tesla’s plans to expand the beta software for fully autonomous driving. Tesla started to expand the use of the software earlier this month and has tested new advanced driver assistance programs on approximately 2,000 people within a year.

Tesla shares closed up 3.2% on Monday to $870.11, close to the record closing high of $883.09 set on January 26.

Elliott is passionate about business and finance news with over 5 years in the industry starting as a writer working his way up into senior positions. He is the driving force behind investingbizz.com with a vision to broaden the company’s readership throughout 2016. He Covers business category.

Elliott holds a Bachelor of Science Degree from Lehigh University, where he majored in Finance and Accounting, with a minor in History. His mainly focused on Investments and Financial Analysis.

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