Tesla Earnings Hinge On China Sales, Supply Chain Costs

Investors will be closely watching Tesla's quarterly results on Wednesday for indications of its performance in China, where the electric carmaker has posted robust sales in the face of negative publicity and a host of new domestic competitors, Hyunjoo Jin reported for Reuters.

Photo Insert: Tesla has posted robust sales in the face of negative publicity and a host of new domestic competitors in China.

The company headed by billionaire entrepreneur Elon Musk is expected to report a jump in revenue driven by record global deliveries in the July to September period. While it has weathered the chip crisis better than rivals, some investors are concerned supply-chain issues could increase costs and weigh down margins.

Tesla's China sales leapt 44% in the third quarter, from the previous quarter, as it boosted exports to Europe and other countries, and it introduced the more affordable Model Y SUVs.

The upside could come from Tesla's Shanghai factory, which has surpassed the company's factory in Fremont, California in terms of production, and has cut costs with the use of more Chinese parts including batteries.

Tesla Inc. started deliveries in late August of a less expensive version of the Model Y sport utility vehicle equipped with cheaper, iron-based batteries made by CATL in China, a source familiar with the matter said.

"The Giga China efficiency is front and center, moving margins higher," said Dan Ives, an analyst at Wedbush who is bullish on Tesla.

Tesla CEO Musk said the Shanghai factory now produced more vehicles than the company's sole US factory. "It's the best quality, lowest cost, and also low drama, so it's great," said he at a shareholders' meeting earlier this month.

Even so, Tesla was not immune to the global supply chain crisis and Tesla has done better partly because it has been willing to pay.

"The sheer amount of money we're spending on flying parts around the world is just not great but hopefully temporary," Musk said.

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