Elon Musk Calls Tesla ‘Recession-Resilient’ as Wall Street Eyes Demand

Now, stronger-than-expected results during the Covid-19 pandemic and years of consistent quarterly profits have given the company a war chest rivaling that of some legacy auto makers. Chief Financial Officer

Zach Kirkhorn

pointed to that buffer Wednesday as Tesla pledged consistent production growth.

“This is a real opportunity, I think, for the company to press forward in the most aggressive way,” Mr. Kirkhorn said, as Tesla reported near-record quarterly profit approaching $3.3 billion.

Tesla was sitting on roughly $21 billion in cash and short-term investments as of the end of September, the company said, up from around $16 billion a year earlier. Luxury-car makers

Mercedes-Benz Group AG

and

Bayerische Motoren Werke AG

had around $21 billion and $23 billion in cash and short-term investments as of midyear, respectively, according to FactSet. Neither company has reported earnings for the most recent quarter.

“Let’s say 2023 is a brutal recession year. Even then, we generate meaningful cash,” said Mr. Musk, Tesla’s chief executive. The company, which didn’t respond to a request for comment, reported having generated $3.3 billion in free cash flow during the third quarter, up from $1.3 billion a year earlier.

Tesla is poised to benefit from U.S. electric-vehicle and battery manufacturing tax credits, and it is well-positioned to pass on potential supply cost savings to consumers in the form of vehicle price cuts, Deutsche Bank analysts said in a note to investors. Tesla has repeatedly raised prices recently as inflation and supply-chain snarls have increased costs and made cars harder to come by for consumers.

“While Tesla is not insulated from a downturn, we believe its growth and margins could be much more resilient than the rest of the industry in a recession globally given the various levers at its disposal,” the analysts wrote.

Such optimism didn’t appear to have allayed Wall Street’s concerns about a possible weakening of demand for Tesla cars. Tesla shares fell 6.7% to $207.28 Thursday after the company lowered full-year growth expectations for 2022. 

Tesla has been aiming to increase vehicle deliveries by an average of 50% annually, but expects to come up short of that target this year as it adjusts vehicle-shipping patterns, Mr. Kirkhorn said.

For years, Tesla’s deliveries have been concentrated toward the end of the quarter as the company pressed to get as many cars as possible into customer hands before the end of the financial period. The company is now trying to smooth out that process.

“There weren’t enough boats. There weren’t enough trains. There weren’t enough car carriers to actually support the wave,” Mr. Musk said. 

Tesla delivered more than 908,000 cars in the first nine months of the year. It would need to hand over nearly half a million vehicles in the final three months of the year to grow 50% from 2021. 

Meanwhile, Tesla is likely to pursue its first share buyback, Mr. Musk said Wednesday, floating the idea of repurchasing $5 billion to $10 billion of stock next year. 

Such a move, called for by some investors, sends the wrong signal given Tesla’s other options for using the capital at its disposal, Jefferies analysts said Wednesday. Tesla raised $10 billion in 2020 by selling new stock. 

The company is aiming to be producing 20 million vehicles annually by 2030, a feat that Mr. Musk has said is likely to require a dozen factories and would easily make Tesla the world’s largest car company by volume. Tesla already enjoys the highest valuation among auto makers.

Write to Rebecca Elliott at [email protected]