Giga Shanghai behind the Bitcoin fire sale at Tesla as profit margins shrink despite 'embarrassing' car prices
Tesla's profit margins, while still being the envy of automakers like Ford, have fallen quite drastically because of the Shanghai Gigafactory closures and other supply chain issues in this past quarter, revealed Elon Musk during the financial results press call with analysts. Tesla went from a whopping 33% gross margin down to 28% in the span of just three months, illustrating the challenges it faced in scaling up production at a few giant factories like Giga Berlin or Shanghai at once.
This struggle is what prompted Volkswagen's CEO to comment recently that Elon Musk has spread himself pretty thin with production goals and Tesla will suffer financially as a consequence, leaving an opening for VW to surpass it and become the world's largest EV maker by 2025. That financial suffering was on full display during Q2 and is reportedly the main reason that forced Tesla to liquidate most of its sizable Bitcoin holdings, in a moment when the cryptocurrency price was in a freefall.
Tesla said it has converted 75% of its Bitcoin holdings in fiat money during this past quarter, adding "US$936 million of cash to our balance sheet." Said balance sheet still shows US$218 in digital assets remaining that, however, may also include its Dogecoin assets. In any case, given that Tesla also sold US$272 million of Bitcoin in Q1, it seemingly isn't way down on its original US$1.5 billion Bitcoin investment, despite analysts worries.
The world's biggest electric car maker even managed to beat said analysts' profit estimates by a tad, even though Tesla had to retreat from its industry-high US$10,000 of profit per vehicle on average. Buoyed by the expected record production ramp in the Fremont and Shanghai Gigafactories in Q3 and Q4, Elon Musk even went as far as hoping that Tesla can lower the "embarrassing" prices of its electric cars if inflation is tamed in the next six months or so.
We’ve raised our prices quite a few times. They’re frankly at embarrassing levels. But we’ve also had a lot of supply-chain and production shocks and we’ve got crazy inflation. So I am hopeful - this is not a promise or anything, but I’m hopeful that at some point we can reduce the prices a little bit.