Tesla posted third quarter revenue of $21.5bn, which was a record and up 55.9% - however this was still weaker than analysts expected. The increased revenue reflected higher vehicle deliveries and average selling prices.
Production rose 54%, but outstripped deliveries by 22,000 vehicles.
Tesla is experiencing raw material cost inflation, but operating costs remained flat, meaning the higher revenue fed into a $1.7bn increase in operating profit to $3.7bn. Operating margins were 17.2%, compared to 14.6% at the same time last year.
The group generated free cash flow of $3.3bn, a $2.0bn improvement on 2021 and has a net cash position of $17.6bn as at the end of the quarter.
Elon Musk said there could be a "meaningful buyback" next year, of $5bn - $10bn.
The shares fell 6.3% in after-hours trading.
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Our View
Decades-high inflation, rising energy bills in Europe and signs of a weakening China market were all blinking alarms heading into Tesla's quarterly results. And yet, the strength of the brand is holding it steady in times of deep economic uncertainty.
But this doesn't mean challenges are over. The most immediately pressing is logistics. Tesla's making more cars than it can deliver and it's increasingly expensive to secure capacity to transport Tesla's vehicles. Until this problem is ironed out, it will act as a drag.
The other big question mark is the availability of batteries. The group acknowledged that "battery supply constraints will be the main limiting factor to EV market growth in the medium and long terms". That's not to say the situation will stop growth, but it will act as a ceiling.
We're also mindful that Tesla has never been tested in times of recession. With the depth of the incoming economic crisis not yet known, we have reservations about how long Tesla can keep raising its prices without volumes and margins dropping. A Tesla starts at £47,500, which is a lot to ask people to spend when times are tough. If material costs continue to come down, the group may be able to reduce prices. But even then, Tesla's unlikely to ever be a "cheap" car option.
Traditional car makers are throwing billions at producing their own electric vehicles. And the very important Chinese market is home to some formidable rivals, including the likes of BYD. Tracking the strength of Tesla's demand is important because it's a textbook example of economies of scale. Tesla's gigantic Gigafactories are expensive to ramp up, but once their costs have been covered, a greater proportion of each car sold drops through to profits. If volumes were to drop, the opposite would be true.
Software is a potential outlet for extra growth - the group's self-driving technology is already delivered to existing vehicles through wireless updates. This lends itself well to software subscription programmes, which would help pad profits and squeeze more out of cars already sold.
Another potential avenue is insurance. It's still early days but Tesla is already seeing green shoots. Driver data is used to set premiums. This creates an instant feedback loop, ultimately encouraging safer driving. Tesla is responsible for fewer accident costs and customers save money. Further afield are aspirations for a fully self-driving robotaxi.
Tesla has an excellent product and current demand is robust. But there are obstacles. Tesla needs an exceptional final quarter if it wants to hit its target of 50% average delivery growth. Failure to do so could see further pressure heaped on a valuation that's come under significant pressure this year.
Tesla key facts
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